Demand at a record level: The big run for gold

As of: 12/27/2021 10:51 a.m.

Golden times: This year, too, shiny Christmas gifts such as gold coins and jewelry were very popular. The demand for the yellow precious metal is booming.

The Germans’ desire for gold is unbroken. Last year, it was mainly the corona crisis and the gigantic national debt that drove German citizens into the yellow precious metal, this year it was the high inflation that triggered a gold rush. Precious metal traders report a large run on their branches during the Christmas business. Rising inflation and ongoing pandemic concerns would have triggered huge demand, said a spokesman for Pro Aurum, one of the largest gold traders in this country.

Demand recently higher than it has been since 2011

Precious metal experts expect a record year for the sale of gold bars and coins. The level of sales of 157 tons last year could be exceeded, believes the managing director of the Precious Metals Association, York Tetzlaff. In the first half of the year, more than 90 tons of bars and coins were sold in Germany, he says, citing data from the World Gold Council. “That was the highest turnover in 12 years.” This trend continued in the second half of the year. In the third quarter, sales increased further and, at 33.7 tons, reached the highest level since 2011, said Tetzlaff.

Worldwide gold outflows

While the Germans continue to buy gold, global demand is falling. In the third quarter, global sales fell by seven percent to 831 tons. Analyst Louise Street from the World Gold Council justifies this with outflows from gold ETFs in the USA and Great Britain. The demand for bars and coins is still high, especially from Germany, which is particularly sensitive to inflation.

The global gold price has fallen slightly this year – on a dollar basis. A troy ounce of the yellow precious metal currently costs $ 1806. A year ago the price was around $ 1,850.

Gold rose in euros

Calculated in euros, however, the gold price has risen. Within a year, the yellow precious metal has risen by almost five percent to almost 1,600 euros per troy ounce. Experts doubt whether the soaring will continue this year. The tightening of monetary policy and the turnaround in interest rates in the USA should make gold less attractive. Because the yellow precious metal does not generate any interest.

No withholding tax on sale after one year

The decisive factor will be whether inflation remains as high as it was last time. If the inflation rate in Germany persists at four to five percent, the fear of many German citizens of creeping inflation is likely to persist.

From a tax point of view, buying gold coins and bars is still attractive. If you hold the physical precious metal for a year and only then sell it, you can reap the tax-free profits. The 25 percent withholding tax no longer applies after one year. However, investors should keep in mind that buying gold coins or bars often incurs steep fees. A South African Krugerrand or a Vienna Philharmonic usually costs four to five percent above the purchase price at precious metal dealers.

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