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Gold Bullion Buying In Germany Surges On Euro Collapse Concerns

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Gold Bullion Buying In Germany Surges On Euro Collapse Concerns

- German gold demand spikes 20% in first quarter

- Gold investment demand surges 63% as jewellery demand falls
-
France, Switzerland and Austria see “double digit” rise in demand
 

- Fear of conflict with Russia, ‘Grexit’ and currency debasement
- Indian gold demand rises 15%
- Global gold demand marginally lower but robust - WGC 

- Germany knows lessons of history and Weimar hyperinflation




Global gold demand remains robust as seen in the latest quarterly figures from the World Gold Council released yesterday.  Q1, 2015 gold demand was just 1% lower year on year but was 3% higher quarter on quarter due to a surge in investment demand which was 4% higher year on year and a whopping 63% surge in investment demand quarter on quarter.

European investors increased their purchases gold during the first quarter according to the report. Increase in demand was highest in Germany while investors in France, Switzerland and Austria also showed strong interest in acquiring the precious metal, with “double digit” increases in demand.




The WGC says that German demand for gold coins and bars “spiked” by 20% in the first quarter of 2015 compared to the same period last year.

CNN reported that it is unusual that there should be such strong demand out of Germany given the strength of the economy.

Although this ignores the strong cultural affinity that Germans have with gold and the fact that they are consistently, along with the Austrians and Swiss, the largest buyers of gold in Europe. What has changed is that more German people are buying gold and they are buying larger amounts due to the various risks challenging Europe and indeed the world.

France, Switzerland and Austria all saw strong demand for gold and it is known that in Greece, demand for gold bullion storage and gold sovereigns in particular was strong too during the quarter.


The first quarter saw the exacerbation of the Greek crisis with the election of Syriza, the initiation of QE by the ECB, massive currency volatility with the breaking of the Swiss Franc peg to the Euro, the failure of Austria’s bad bank and very tense relations between the West and Russia over Ukraine.

“The first three months of 2015 represented the strongest start to a year for European gold demand since 2011” when the European sovereign debt crisis was at its peak.
 


Gold Demand Trends Q1 2015 - World Gold Council

Germans are very concerned about inflation, currency debasement and devaluation due to Mario Draghi’s QE program. Germany had put up strong resistance to ECB euro ‘printing’ but in the end the ECB prevailed when Germany was assured it would not be liable for less reliable government bonds bought by other central banks.

Italian banker Mario Draghi said yesterday that the quantitative program has “proven so far to be potent, more so than many observers anticipated.” At a speech to the IMF at headquarters in Washington the ex-Goldman banker said that “while we have already seen a substantial effect of our measures on asset prices and economic confidence, what ultimately matters is that we see an equivalent effect on investment, consumption and inflation.”
 



Draghi’s QE has not achieved any of its stated objectives. His pronouncement that it has been “potent” is therefore premature. History offers no assurances that these objectives will be met.

Indeed, even very recent history is not assuring. QE in Japan and in the U.S. has had little effect on the real economy. The primary beneficiaries, as Alan Greenspan recently pointed out, were the super-rich for whom it was a “terrific success.”

The fact that QE in the U.S. has not yet led to high inflation is not proof that it cannot happen. The Fed’s balance sheet is still bloated and we will not be in a position to judge the efficacy of the experiment until it has been fully wound down - if it ever is. Indeed, the recent string of poor economic data out of the U.S. suggests that rather than interest rate rises, the Fed may be forced to embark on QE4.

German are rightly concerned about currency debasement of the world’s reserve currency and indeed of all reserve and major currencies today including the euro. Some dismiss this concern as Germans being ‘paranoid’ about inflation. This is not fair to the Germans and shows a complete lack of awareness of history and the risks of currency debasement.



It also shows a huge complacency and the dangerous thinking of this is a “new paradigm” and “this time is different.” This time is never different and the Germans know this.  

Psychological scars were inflicted by the epic hyperinflation experienced by Germany in the Weimar Republic - a hyperinflation caused by unlimited currency creation by a desperate central bank. Germans have learnt the lessons of history - unlike many other nations today.

It is worth recalling the Germans experience of hyperinflation. In January of 1919 a single ounce of gold could be purchased for 170 Marks. Within a year the price had increased almost eightfold as currency printing devalued the Mark to over 1,000 Marks per ounce.
 

The price stabilised over the next year and then doubled in 1921 before surging over 9,300% throughout 1922.
 

With each passing year the currency fell in value to ever more absurd depths until by November 1923 an ounce of gold - which had cost 170 Marks only five years previously - was trading at 87,000,000,000,000 Marks per ounce.




Silver saw similar price gains - or rather to put it more accurately silver too remained a store of value and maintained purchasing power as the currency collapsed.

The bitter hardship and instability arising out of this experiment by people who believed they knew best was only ‘stabilised’ by the fascist war machine and the rise of Hitler and the Nazis which resulted in further economic hardship and collapse after their defeat in World War II - largely at the hands of the Russians.

The Weimar experience teaches us the value of owning money that cannot be created out of thin air by government decree. The Germans have learnt this lesson.

It is ironic that the people living in the strongest economy in the EU and the one with the best outlooks are buying more gold than people in much more vulnerable countries. Gold buying in Ireland, Portugal, Spain and Italy remains very low despite people in these economies being even more exposed to financial risk than the Germans.

Before some market commentator decides to attack us and call us gold “bugs” who are predicting hyperinflation, let us qualify. We are not predicting hyperinflation.

We feel it is important to look at history and to acknowledge that hyperinflation is a possibility - especially if central banks continue to debase currencies en masse. Currently, it remains a low possibility, however what is a strong possibility and indeed is something we view as inevitable is very significant inflation and stagflation in the coming years and hence the need to own physical gold and silver in secure vaults internationally.   

One of the most successful fund managers in the world, Ray Dalio, addressing the influential Council on Foreign Relations about gold, recently said, “it’s not sensible not to own gold”. He added, “there is no sensible reason other than you don’t know history and you don’t know the economics of it”.

He described gold as a currency comparable to the dollar or yen or euro and suggested that investors hold 10% of their savings in physical gold.

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Sun, 05/17/2015 - 13:16 | 6103153 CarpetShag
CarpetShag's picture

"Physical is tight" ( as a nun's thighs)
A. Maguire over at Turd's
http://www.tfmetalsreport.com/podcast/6848/talking-gold-andrew-maguire

Sun, 05/17/2015 - 14:00 | 6103270 CarpetShag
CarpetShag's picture

...and silver is about to complete a double-ass formation.

Sun, 05/17/2015 - 12:46 | 6103070 Pliskin
Pliskin's picture

I have a friend who swears by 'Bitcoin' ... even though he hasn't worked for the last 7 years and the government pay his mortgage, kids education and all his university fees..YAY  Bitcoin....bollox

 

Download all your bitcoins and shove them up your arse, oh, yeh, not very painful...great.

If I tried to shove all my gold up my arse it would REALLY hurt..now that's wealth...bitchez.

 

Sun, 05/17/2015 - 12:44 | 6103054 TeethVillage88s
TeethVillage88s's picture

I'm thinking Germany can afford it and there is Disposable Income to buy Gold.

-

Household Debt to GDP for Germany©
2014:Q3: 53.96150 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDDEQ163N, Updated: 2015-04-01

Household Debt to GDP for United States©
2014:Q4: 79.96307 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDUSQ163N, Updated: 2015-04-01

Household Debt to GDP for Canada©
2014:Q4: 93.63788 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDCAQ163N, Updated: 2015-05-01

Household Debt to GDP for Australia©
2014:Q4: 98.26740 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDAUQ163N, Updated: 2015-05-01

Household Debt to GDP for France©
2013: 54.97816 Ratio (+ see more)
Annual, Not Seasonally Adjusted, HDTGPDFRA163N, Updated: 2015-03-02

Household Debt to GDP for Republic of Korea©
2014:Q2: 85.22364 Ratio (+ see more)
Quarterly, Not Seasonally Adjusted, HDTGPDKRQ163N, Updated: 2015-04-01

Current account Balance of 193 countries as per CIA, Germany is #1

1 Germany $257,700,000,000 2014 est.
2 China $204,300,000,000 2014 est.
3 Saudi Arabia $108,700,000,000 2014 est.
4 Netherlands $79,200,000,000 2014 est.
5 Korea, South $79,000,000,000 2014 est.
6 Switzerland $76,200,000,000 2014 est.
193 United States -$385,800,000,000 2014 est.

Central government debt, total (% of GDP) for Germany
2012: 55.18233 Percent of GDP (+ see more)
Annual, Not Seasonally Adjusted, DEBTTLDEA188A, Updated: 2014-12-17

Sun, 05/17/2015 - 12:40 | 6103051 Pliskin
Pliskin's picture

but...but...but...Martin Armstrong said....

 

Epic fail!

Sun, 05/17/2015 - 11:53 | 6102941 Dragon HAwk
Dragon HAwk's picture

Be funny to do a cartoon skit, of a Military general walking out of a Deep Bunker  up into barter town , and say.. Hi I'd like to buy a bunch of fresh eggs and Milk.. and then try to pay with a Fat roll of freshly printed $100.00 dollar bills..

 

Sun, 05/17/2015 - 11:53 | 6102940 CarpetShag
CarpetShag's picture

The WGC is to gold as the BLS is to unemployment.

Sun, 05/17/2015 - 11:51 | 6102936 Motorhead
Motorhead's picture

More rah-rah nonsense from the gold pumpers.  Like we care what the price of gold was in 1923 Germany.

Sun, 05/17/2015 - 12:15 | 6103006 Pickleton
Pickleton's picture

Ray Dalio, addressing the influential Council on Foreign Relations about gold, recently said, “it’s not sensible not to own gold”. He added, “there is no sensible reason other than you don’t know history and you don’t know the economics of it”.
 

 

In other words, Ray was talking to people like you.

Sun, 05/17/2015 - 12:31 | 6103039 gimme-gimme-gimme
gimme-gimme-gimme's picture

He got a few good laughs though.

Sun, 05/17/2015 - 11:47 | 6102926 Mark of Zerro
Mark of Zerro's picture

Nah.... People are still not plugged in and not buying gold or silver in big quantities.  When these reports start telling a narrative that shows triple and quadruple digit percentage increases, then we know the PM's are getting traction.

 

Sun, 05/17/2015 - 10:14 | 6102729 moneybots
moneybots's picture

"With each passing year the currency fell in value to ever more absurd depths until by November 1923 an ounce of gold - which had cost 170 Marks only five years previously - was trading at 87,000,000,000,000 Marks per ounce." 

 

As Martin Armstrong has pointed out, Weimar was a revolutionary government and had no debt market.

The FED stopped QE. Even if the FED restarts QE, someone has to borrow the money. Banks are lenders. Obama has proposed some 200+ tax increases. The money isn't free.


Sun, 05/17/2015 - 10:24 | 6102756 moneybots
moneybots's picture

"...gold - which had cost 170 Marks only five years previously - was trading at 87,000,000,000,000 Marks per ounce."

 

Finish the story.  What was gold worth in Marks per ounce, once a new currency was created?  It wasn't worth 87 trillion any more.

The price of everything hyper-deflated.

Sun, 05/17/2015 - 12:14 | 6103000 hendrik1730
hendrik1730's picture

Yes, but your savings, pension plan, older government bonds ... were worthless. Imagine being 65 and having to start from scratch in 1923. Good luck, Moneybots.

Sun, 05/17/2015 - 09:55 | 6102684 moneybots
moneybots's picture

87 trillion for an ounce of gold in Weimar Germany.  And people think the U.S. is going to experience hyperinflation, when gold is predicted to go to 5,000 an ounce in the U.S.  Not even close.

Sun, 05/17/2015 - 12:19 | 6103017 hendrik1730
hendrik1730's picture

True story : in the midst of the Weimar inflationary period, a small Cy owner ( one of the few who was still operating ) went on his daily walk to the bank for getting the paper money needed to pay off his personnel ( on a daily basis since the money devaluated by the hour ), thereby taking a wheelbarrow with him in order to transport about 50 kg of paper money. Coming back from the bank, he was robbed. The robbers did not take the money, they took the wheelbarrow. Rest assured, if TSHTF, it will be economically better to heat your house by burning 100 US$ banknotes than with coal.

Sun, 05/17/2015 - 11:24 | 6102864 LawsofPhysics
LawsofPhysics's picture

You are an idiot. Under the right conditions a can of beans can have great value.

Sun, 05/17/2015 - 11:17 | 6102853 tarabel
tarabel's picture

 

 

By the time gold reaches 5000 an ounce, only a greedy idiot would trade out their gold for the cash. But there are many otherwise sane people who will succumb to the lure of "making money" on the trade.

Sun, 05/17/2015 - 09:46 | 6102662 Dumgoy
Dumgoy's picture

I prefer Federal Reserve notes, with their limited supply and intrinsic value.  Gold is for suckers.

Sun, 05/17/2015 - 10:56 | 6102811 BoredRoom
BoredRoom's picture

I prefer BITCOIN and other digital currencies, because surely they will be protected via the ObamaNet

Sun, 05/17/2015 - 11:25 | 6102869 LawsofPhysics
LawsofPhysics's picture

If you cannot touch "it", or defend "it", you don't own "it". Period.

Sun, 05/17/2015 - 12:22 | 6103024 hendrik1730
hendrik1730's picture

I recognise the true physician here. If one cannot see, feel or touch it, it doesn't exist. Ockhams rasor.

Sun, 05/17/2015 - 10:41 | 6102779 TheReplacement
TheReplacement's picture

I will gladly pay you in FRNs tomorrow for your gold today.

 

Sun, 05/17/2015 - 13:00 | 6103105 mvsjcl
mvsjcl's picture

Take everything the "non-partisan" World Gold Council publishes with a grain of salt.

Sun, 05/17/2015 - 13:09 | 6103130 BoredRoom
BoredRoom's picture

Which party do they represent?

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