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Survey concludes Germans hold more gold than their central bank

Section: Daily Dispatches

Germans Hoard More Gold than the Bundesbank

By Frank Stocker
Die Welt (The World), Berlin
Tuesday, April 16, 2019

The Germans own about 6.5 percent of the world's gold holdings. In the past two years alone 250 tons have been added. And the interest continues to grow. But experts doubt that gold is the most lucrative savings option.

The love of Germans for gold is well known. It reaches up to the highest floors: The Bundesbank hoards as much gold as almost any other central bank in the world. Some 3,370 tons are in the Bundesbak's possession. Only the United States guards an even bigger treasure in the cellars of Fort Knox, namely around 8,130 tons.

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But Germany's citizens own even more gold -- more than the Bundesbank and even more than the U.S. The appetite for the precious metal, however, seems unbroken: over the past three years, holdings in coffers and safes in Germany have even risen significantly, and German citizens also want to buy more gold in the coming years.

In total, private individuals in Germany own around 8,918 tonnes of gold. These figures were calculated by researchers from Steinbeis University for travel agencies on the basis of a representative survey of 2,000 adults. About half of it consists of bars and coins and corresponding securities, and just under 4,000 tons are jewelry. A troy ounce of gold (31.1 grams) currently costs about $1,287 dollars or 1,137 euros, resulting in a fortune of about 326 billion euros, which is bound in Germany in the precious metal.

Compared to the last such survey three years ago, private gold ownership in Germany has increased by about 246 tonnes. Around a quarter of respondents said they had bought gold in the past two years. "The demand driver is the prevailing uncertainty, for example, due to the trade dispute," says Christof Wilms, head dealer of ReiseBank. Above all, there is a continuing strong demand for physical gold. "Especially wanted are gold bars from 100 grams and bullion coins."

According to the survey, every German over the age of 18 has on average 58 grams of gold jewelery and 71 grams of gold in the form of bars or coins. However, not everyone has gold at home. Only 38 percent of Germans own coins or bars, just under 62 percent have at least gold jewelry -- after all, most couples wear a ring from the precious metal.

The wedding ring is of course worn on the finger or kept at home. However, this is different for the rest of the gold possession. The places where this treasure is kept have changed in recent years. By now, home use is only 38.3 percent, a slight decline from 2016.

Special precious metal deposits or custodians of specialized providers are also less popular. Their share has fallen from 7.5 to 5 percent. On the other hand, lockers are leased much more frequently to banks, whose share rose from 36 to 39 percent.

If one were to collect the precious metal from all the repositories in the different corners of the republic and combine them with the gold reserves of the Bundesbank, then this would result in an imposing treasure of 12,288 tons. That sounds huge, but that's 6.5 percent of the world's gold reserves. Yet that's just a cube with an edge length of 8.60 meters.

But the cube should continue to grow in the coming years, because the survey says the Germans want to continue buying. Of those who have bought gold over the past few years, more than three-quarters of them want to do so in the future. And only 7.8 percent of those who own something from the precious metal are thinking of selling.

However, gold owners should not hope for much higher prices. "Overall there seems to be a consensus that the gold price is moving in a tight range," said Joni Teves, a strategist at investment bank UBS, "but with a slight uptrend."

This comes from the fall in interest rates in the United States. Since the Fed has made it clear that it has not raised interest rates and economic sentiment has deteriorated, yields on 10-year U.S. Treasuries have dropped from three to 2.5 percent. Since gold does not pay interest, this weighs more than a disadvantage, the higher the interest rates.

Supporting the price of gold is that central banks continue to buy more. Last year they purchased around 650 tonnes, with China, Russia, Turkey, and India leading the way. In the first three months of this year, according to first estimates, they bought about 117 tons.

However, lower gold prices could be threatening as the first signs of the economic slowdown of the past few months pass. "Global recovery and improved investor risk appetite could weigh on the price of gold," says Teves. Then investors are more likely to buy stocks again.

However, it is crucial how the U.S. economy is doing relative to others, Teves believes. "A scenario where the situation in the U.S. improves, but still lags behind others, would continue to be positive for gold." For example, if the euro zone outperformed, the dollar would probably fall -- in the past, a weak dollar Usually pushes the gold price up.

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