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The Current Situation on the Gold Market -
A Comment by Wolfgang Wrzesniok-Roßbach, CEO of Degussa Goldhandel
Currently, the price of gold is falling, particularly as a
result of sales in the USA. There, not only hedge funds but also
private investors (directly and indirectly via pension funds) are
exiting the gold market. There are various reasons for this behavior:
On the one hand, it is the low volatility of the gold market
that discourages investors because it does not promise any shortterm
profit opportunities; on the other hand, the robust US economy
generally reduces fear of the future and thus the need for
hedging.
Another factor that should not be underestimated is the fact that
the traditionally sceptical, but at the same time very precious-metals
affine population groups in the US believe that President
Trump is »one of their own« in the White House and are therefore
also likely to buy less gold at the moment.
The low level of demand in the USA is reflected in massive outflows
of gold in the form of coins, which are floating from the
USA to Europe in particular and have ensured that the premiums
for coins in Germany have fallen sharply at times and that the
business of minting companies around the world is thus also
suffering.
Furthermore, it cannot be ruled out that central banks from countries
currently in crisis could also sell gold. Traditionally, however,
such sales are only made public after a long delay, so that at the
moment it can only be speculated about.
First and foremost, Turkey would be a candidate for such behaviour,
as in the light of the economic and financial problems, it will
certainly have a need for foreign exchange. It is also interesting to
note that Turkish private investors are currently selling gold and
thus buy the lira (which has now become much cheaper). Since the
Turkish population has traditionally been extremely affine to gold,
such behaviour could also have (albeit limited) effects on the world
market price.
In order to turn the mood around in favour of gold worldwide in
consideration of the higher supply, a disruptive shock event is probably
needed on the economic and financial markets. The possible
dangers for these markets are already being discussed (too high
share prices, further developments in Turkey with effects on southern
European banks, debt levels in China, economic problems in
South Africa, Venezuela, Argentina, etc.). Should something happen
here, the price of gold will presumably rise very quickly,
because then the speculators, who currently have uncovered minus
positions on the gold market, will also have to cover them fast.
By the way, German customers are not discouraged by the recent
fall in prices. They are taking advantage of the fall in prices to
make massive purchases, and we were not the only ones who had
the best sales in the last 1.5 years in July. And the traditionally
quiet holiday month of August was also very satisfactory.
All in all, we expect the market to remain rather calm for the time
being. Initial profit taking by short speculators, an end to central
bank sales (and at the same time purchases by other central banks
such as Russia, China, etc.) and a stable demand on the part of
private customers will prevent the gold price from continuing to fall
significantly in value. However, should there be a sudden and
massive disruption in the economic or financial markets, the price
of gold will quickly rise by 10 percent and more.
www.degussa-goldhandel.de
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Investment-Immobilien: Wohn- und Geschäftshäuser, Büroimmobilien, Baugrundstücke
Investment-Immobilien: Wohn- und Geschäftshäuser, Büroimmobilien, Baugrundstücke