Gold in high demand

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The Americans are stocking up on weapons, the Germans, Japanese and Australians on toilet paper and pretty much everyone, central banks included, gold. The online shops of gold retailers and dealers are currently experiencing a huge rush towards the precious yellow metal. But meanwhile, they can hardly deliver bars and coins anymore – because of supply problems.

Those who want to buy the popular Krugerrand coins at the moment will have to wait. Possibly several weeks because big gold dealers like Degussa and Pro Aurum the coins are currently sold out.

Also, other coins and bars are increasingly scarce. Pro Aurum, therefore, limited the orders in its online shop to 500 pieces. After the contingent was sold out, the online sale was temporarily stopped. The customers have to wait ten to twelve days for the delivery.

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Another issue is that three of the world’s four largest gold refineries are located in Ticino, Switzerland. The Swiss canton is on the border with Italy, and similar to its neighbouring country, all companies in Ticino that are not systemically relevant have had to cease production. Equivalent alternatives are currently not available. 

There are also no supplies from the state mints in the USA and Canada, where coins such as the American Eagle or the Maple Leaf are produced. Furthermore, there are supply problems in South Africa, where the fight against the corona pandemic is slowing down gold production at the mines.

If the situation continues, the bars and coins could soon run out entirely. This extreme case could occur in one to three weeks, some companies state. Suddenly even the crisis metal is in a crisis!

The scarcity of supply meets an extremely high demand from institutional but also private individuals. Since the beginning of March, Degussa has recorded a 500 per cent increase in orders. Pro Aurum also reports five to six times more sales than in standard times. “The current rush is surpassing the summer of 2015 when Greece’s stay in the eurozone was at stake,” Daniel Marburger, of the online retailer Coininvest, explained in an interview.

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The tense situation is also reflected in a currently comparatively high spread between the purchase price paid by gold traders and the selling price to customers. Mark-ups of four per cent are standard, industry experts say but in some cases, up to 15 per cent are being charged. 

Gold ETFs as an alternative choice

However, those investors who do not want to do without gold as a safe investment haven can still easily buy securities backed by gold. Investors can invest in Xetra-Gold of Deutsche Börse or in gold ETFs. ETF savings plans are often favourable. With some providers, the monthly rate is only 25 euros. However, one should be careful with offers that promise a regular, secure interest rate, warns Finanztest, which examined 19 providers of gold savings plans. Nobody can guarantee a fixed return, and the development of the gold price cannot be predicted.

What is certain is that gold buyers have come through the corona crisis relatively unscathed so far. In the first quarter, the price of the precious yellow metal rose by about five per cent despite the at times heavy losses. Most recently, gold cost over 1,640 dollars per troy ounce (31.1 grams). 

The current flood of money from the different central banks around the globe in the fight against the crisis will, according to experts, push the gold price further towards a record high. Even Goldman Sachs advises investing in gold. The investment bank speaks of a “revival” of the safe investment haven. At Degussa Gold Trading, the gold price is even expected to reach a ceiling of $1,930 this year. “It has become highly likely that this upper limit can be reached or even exceeded in the wake of the coronavirus pandemic,” said Thorsten Polleit, chief economist at Degussa Goldhandel. This would then be a new record high in the price of the precious metal.

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