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Gold as a crisis currency

Gold has the reputation of being a popular asset, especially in times of economic crisis. The crises of recent years, be it pandemic or geopolitical upheavals, have fueled the demand for gold. According to York Tetzlaff, managing director of the German Precious Metals Association, more than 90 tons of bars and coins were turned over in Germany in the first half of 2021 alone. This was a record-breaking high for 12 years, just China has bought more gold than Germany.

The advantage of gold is obvious: it is a real, physical asset, not just a promise like our fiat money system. The term “fiat money” is derived from the Latin word “fiat”, which means “let it be, let it be”, and is used for all currencies that are not tied to the price of a commodity such as gold or silver. Jim Read, analyst at Deutsche Bank, judges that “fiat money will be a passing fad in the long-term history of money.” This means nothing more than that “fiat money” is an object with no intrinsic value. And further, Reid says: “Gold is definitely a fiat money hedge.” So, according to him, gold is a hedge for fiat money, which he believes is facing its historical end.

The value of gold, on the other hand, has remained the same over centuries, as numerous examples prove. In ancient Rome, a ceremonial toga cost an ounce of gold, about as much as a high-end designer suit does today.

Conclusion: Gold secures your assets, protects them from galloping inflation and the associated loss of purchasing power. In a crisis scenario, the gold price could spike upwards in the short term, as observed at the start of the war in Ukraine for example. Although the price of the coveted precious metal has now stabilized at a somewhat higher level than before, in the medium-term experts such as Ronald Stöferle, fund manager and publisher of the specialist report “In Gold We Trust”, expect a significantly higher gold price beyond the EUR 2,000 mark.


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