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The reasons behind Germany's frenzy of private gold purchases are worth pondering

Time: January 16, 2020 15:53:36 China Finance
Everyone knows that the Germans have a natural passion for gold, whether it is the government, the central bank or the general public. Data show that the amount of gold held by the Germans reached a staggering 9,000 tons, of which 55% were physical gold bars and coins, and the rest were gold jewelry. But in the recent period of time, the enthusiasm of the German people for buying gold is still beyond everyone's expectations.

Beginning at the end of December last year, a striking scene appeared across Germany-customers lined up outside the country's precious metal shops and gold dealers' showrooms, and the scene was so spectacular. Is this a German purchase of seasonal gifts? Or is it a panic caused by the recession in Europe's largest economy? In fact, the reasons for this gold purchase are manifold. The enlightenment brought to us is also worth pondering.

First of all, the key factor driving Germany's current round of gold consumption boom is that from January 10, 2020, Germany's new national legislation will take effect, which will increase the restrictions on anonymous purchases of precious metals-the purchase ceiling will be reduced from $ 11,150 to $ 2,230. .

In Germany, such anonymous transactions are called "Tafelgeschafte". In general, the German "Tafelgeschafte" concept refers to any over-the-counter transaction of investments or securities that clients can obtain in kind. This may include bearer bonds or coupon-bearing stock securities, as well as physical precious metal bars and coins. In these literally over-the-counter transactions, customers do not need an account to conduct transactions and remain anonymous. For example, in a gold transaction, the customer pays cash and the dealer or bank provides gold bars or coins.

Legal changes have given birth to the wildest recent gold buying wave in Germany, and people are hoping to hoard as much gold as possible before the deadline. According to foreign media reports, long lines have been lined up outside Germany's largest gold dealers, including Degussa and Pro Aurum. German financial media Borse Online concluded in an article: "The current situation is that gold traders are feeling the pressure of supply shortages. Outsiders are full of gold stores, and the long queues have been lined up on the street."

Raphael Scherer, managing director of Degussa Edelmetalle, feels helpless about the situation. In fact, large gold traders like Pro Aurum and Degussa are currently under pressure from gold supplies as customers are frantically emptying their shelves. Pro Aurum principal Robert Hartmann also said: "We are currently seeing a three-fold increase in normal orders-including online and branch orders."

You know, Degusa, Pro Aurum, and Degussa Edelmetalle are Europe's premier gold traders. When these large dealers feel the shortage of supplies, we can fully realize the public's enthusiasm for gold. This result seems to prove one thing more: people are dissatisfied with the negative interest rate environment, and they are also afraid of technological decline. This is not only the national condition of Germany, but also the status quo of the entire euro area.

Data released on Wednesday showed that Germany's full-year GDP growth rate in 2019 was 0.6%, in line with market expectations but lower than the previous value of 1.5%. According to agency comments, Germany's GDP growth rate in 2019 has reached a new low since 2013, and economic growth has slowed down significantly. As the "locomotive" of Europe's economy, Germany is in trouble, and the weakness of the euro area economy is evident-after all, we can't count on Britain's imminent completion of Brexit or France, which has been burnt by the strike, to make much contribution.

It can be seen that although the gold buying boom in Germany may only be temporary, the image of the economic downturn has taken root in the hearts of the people, which will become a medium-to-long-term good for boosting gold demand and pushing up the price of gold.

In addition, the reason why people can buy gold crazy is also related to Germany's complete sales system. The German gold market is one of the most mature and developed markets in the world. It supports industry players to cooperate extensively and has established a set of banks, gold refineries, gold dealers and distributors nationwide, and scale Complete sales system for smaller regional and local gold retailers. This shows that a complete sales system has an irreplaceable role in boosting gold demand.

Earlier foreign media reported that major gold demanding countries such as India are also working hard to build a more complete gold sales system. As a result, private gold demand may continue to increase.

The last revelation brought by this wave of gold purchases is that there are still many regulatory loopholes in the international gold market that deserve the attention of market participants. Take Germany as an example. When the new regulations came out, the German government bluntly told the media that the government had previously traded gold, silver or platinum in the privately held total value of gold, gold cash transactions, anonymous transactions, and precious metals cash transactions. There is a lack of information on issues such as their respective proportions, and they do not play a good role as supervisors.

It is foreseeable that in the coming days, strengthening supervision and purifying the stability of the gold trading market will become one of the priorities of the German government, which also deserves the attention of governments and private investors in other countries.
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