Q1 physical gold sales up 20% in Germany as gold price hits $1,233

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By Peter Cooper

Gold prices began the week at their best for three months and immediately bounced higher again to $1,233 an ounce with silver outperforming with higher percentage gains at $17.74.

Meantime, the latest World Gold Council data revealed that the total demand for gold bars and coins was up by 20 per cent in Germany in the first quarter in a rush to get out of the then slumping euro.

Euro’s impact

The German economy may be the best performing in Europe at the moment but that has been partly down to a devaluing currency, and one sure fire way to protect against devaluation was to buy gold which is priced in US dollars.

There is also a good historical precedent for Germans to buy gold as twice in less than a hundred years paper money has become worthless: in the hyperinflation of the early 1920s and when the Nazi regime was annihilated.

Could the European Central Bank’s $1.3 billion bond buying program result in similar inflation? With deflation more of a pressing problem it seems unlikely but then again printing money does usually end up with money losing its value.

Then there are worries about the Greek debt crisis and whether that might produce a second round of the global financial crisis and concern about growing Russian nationalism and its invasion and annexation of Ukrainian territory.

Euro strength

Still we will have to see if Germans continue to buy gold now that the euro is rising against the US dollar in a spectacular reversal that has caught out many pundits in the foreign exchange market. Some later buyers of gold will have lost money in euros.

Demand for gold bars and coins was actually waning in other parts of the world in the first quarter with total global demand down 10 per cent while US demand for these physical hard assets dropped by 12 per cent.

However, with fears of rising US interest rates now being kicked further and further down the road, the recent weakness of the gold price looks overdone and a return to $1,300 seen earlier this year looks likely.


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