What do zero interest rate policies and the wedding boom have in common? Both of these promote business in gold. The shiny precious metal has been in demand for a long time - whether as a Krugerrand or an engagement ring.
Munich (dpa) - Business with gold is booming: dealers and jewelers are reporting growing demand for the precious metal. The resulting increase in gold prices affects gold as an investment product as well as the gold jewelry market.
In addition, many customers are increasingly carrying old gold to department stores or jewelry stores due to the price increase. From Friday, the jewelry and jewelery industry will meet again at the Munich trade fair Inhorgenta, at which over 1050 exhibitors are expected.
"In euros, the gold price has reached a record high," says Michael Eubel, head of the precious metals business at BayernLB, which traded over 60 tons of physical gold in 2019. The ounce is currently traded in London for over 1400 euros, the highest ever since the introduction of the common currency. Many experts expect the price to continue to rise. The international quotation in euros is not relevant. "The world is looking at the gold price in dollars, and we're still about $ 400 below the peak in 2011 when an ounce was trading for around $ 1900," said Eubel.
The reason for the increased attractiveness of gold is obvious: "The overarching discussion is the negative interest rates," says Benjamin Summa, spokesman for the Munich gold trading company Pro Aurum. "The discussion has also reached the small savers."
Many banks and savings banks have been charging interest for larger savings for some time now, and there are now some institutes that collect interest from their customers from the first euro credit. If inflation is factored in, savers lose money even without penalty interest. Gold has always had the reputation of being a comparatively safe investment. "Before the turn of the year we were almost sold out, there were dramatic delivery bottlenecks," says Summa.
Gold has always been particularly important in Germany: "In terms of population, Germany is the most gold-loving country," says BayernLB chief dealer Eubel. The Germans therefore buy around 100 tons of the shiny metal per year. And the Bundesbank also owns the world's second largest gold reserves, a total of over 3300 tons.
Jewelers also report strong demand, although jewelry is not about returns and price increases. "Gold jewelry is not an investment, but a valuable investment," says Joachim Dünkelmann, managing director of the Federal Association of Jewelers. "The rising gold price does not cause demand to decline, on the contrary."
An important factor has nothing to do with the financial market: "The number of marriages is increasing," reports Dünkelmann. According to the Federal Statistical Office, over 449,000 weddings were celebrated in Germany in 2018, 70,000 more than ten years earlier.
Since 2018 same-sex marriages have been counted that were previously not included in the statistics. However, that alone does not explain the current run at the registry offices, because in 2018 there were only just under 33,000 same-sex weddings. And many young couples not only buy wedding rings, but also increasingly engagement rings. "The application ring is back," says Dünkelmann.
The gold market influences the jewelry market: when gold becomes more expensive, the prices for gold jewelry naturally rise with a certain delay. But the reverse is not true. "Around 4,300 tons of physical gold are in demand worldwide every year," says BayernLB expert Eubel. "Half of it goes to the jewelry industry. Does that have an impact on the price? The clear answer: No."
The reason: "Gold has been a highly liquid asset class on the financial market at the latest," says Eubel. Gold is traded predominantly in electronic form. In addition, as with other asset classes, derivatives and funds of all kinds are also on the market. "The purely physical trade accounts for less than one percent," says Eubel.
