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Germany's Golden Decade

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Last month, the World Gold Council published a new edition of its market update about Germanys gold investment market. What can we learn from the report?

Before 2008, the German gold investment market was very small. But it has boomed in the past 10 years. Now, it is one of the worlds largest. Indeed, in 2016, 6.8bn was plowed into German gold investment products.

The catalyst for that rise was obviously the global financial crisis which burst out in 2008. German investors started to worry about the state of the domestic banking system (and rightly so, as Germanys state-owned banks were heavily hit). And thanks to the emergence of the gold-backed exchange-traded commodities market, it has become easier to buy gold that is was in the past.

The European sovereign debt crisis increased the investors uncertainty even further. Not to mention the ultra loose monetary policy implemented by the ECB headed by Mario Draghi who pledged to do whatever it takes to preserve the euro. Germans have a collective memory of hyperinflation and collapses of fiat currencies (in the past 100 years, they had eight different currencies), so they were suspicious of quantitative easing andzero interest rates (or even negative yields ).

Indeed, the WGCs 2016 survey of more than 2,000 German investors revealed that: 59 percent of respondents agreed with the statement that gold will never lose its value in the long-term, 48 percent agreed with the statement that owning gold makes me feel secure for the long-term, and 42 percent agreed with the statement I trust gold more than the currencies of countries. It indicates that gold is indeed perceived as the safe-haven asset , or a tool of wealth preservation over the long run. Rightly so. However, investors should remember that gold does not necessarily hedge against creeping inflation and in the short term its price is driven by market sentiment to a large extent. Stay tuned!

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron, Ph.D.
Sunshine Profits Gold News Monitor and Market Overview Editor

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About the author

Arkadiusz Sieron is a certified Investment Adviser. He is a long-time precious metals market enthusiast, currently a Ph.D. candidate, dissertation on the redistributive effects of monetary inflation (Cantillon effects). Arkadiusz is a free market advocate who believes in the power of peaceful and voluntary cooperation of people. He is an economist and board member at the Polish Mises Institute think tank. He is also a Laureate of the 6th International Vernon Smith Prize. Arkadiusz is the author of Sunshine Profits’ monthly Market Overview report and daily Gold News Monitors, in which he keeps subscribers up-to-date regarding key fundamental developments affecting the gold market and helps them prepare for the major changes.

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