Friday, October 6, 2017

2016 saw massive moves into gold for the German and British people

Since the Bank of England and European Central Banks have both destroyed fixed income options for retirees and investors through their ZIRP and NIRP monetary policies, 2016 saw an interesting paradigm shift in both England and Germany as for the first time in many years, individuals began to buy gold in quantities not seen in decades.

Fears of a Eurozone breakup and declining confidence in banks played a large role in gold being the safe haven choice for savers and investors in the UK and Germany, and this also forecasts a growing sea change for investors in their asset allocations.

According to a Reuters report, gold dealers in the UK report an extraordinary interest in gold post-Brexit – much of it from first-time buyers. The Pure Gold Company CEO Joshua Saul said British customers are pouring large portions of their wealth into the precious metal: 
The speed at which people are purchasing gold is unprecedented. We are seeing people convert as much as 40 to 50% of their net worth into physical gold, (compared to) 5 to 10% in the past.” 
The British Royal Mint also reports a surge in business with a 7-fold increase in the sale of 100-gram bars. A spokesperson for the mint said “This shows little sign of declining,” noting that half of the buyers opted to store their purchased metal in its vaults. 
London-based trading platform said some 4 million pounds ($5.5 million) in gold and silver were traded in the weekend after the Brexit vote. The number of first-time buyers on the site increased 170% in late June and into the first week of July. – Schiff Gold
Germans invested a hefty $7 billion into gold products in 2016, the World Gold Council (WGC) said in its October market update, adding that there is more room to grow.
WGC pointed out that traders in Germany choose to protect their wealth by buying gold, as loose monetary policies around the world and a potential of another financial crisis are worrying the EU country. 
Germany’s volatile economic history is one of the underlying reasons behind the country’s appreciation for gold. 
“German investors have an acute awareness of the wealth-eroding effects of financial instability. Hyper-inflation in the 1920s lingers on in the collective memory but, perhaps more importantly, German investors have seen fiat currencies come and go: in the past 100 years, Germany has had eight different currencies,” WGC noted. – Kitco News
With central banks now talking about putting and end to Quantitative Easing (QE) programs and being forced to raise interest rates after a decade of them being at or below zero, investors are unsure how the markets will react to an environment not fueled by the ECB.  And when you couple in the insolvency risks of institutions such as Duetsche Bank, moves into gold are likely to increase over the next few years as wealth protection becomes the word of the day instead of continuously seeking that little bit of extra yield.


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