Why does the gold value fluctuate

InvestmentWhy investors shouldn't be blinded by the gold price

There are not very many investments that have such a brilliant reputation in this country as gold. If you ask the Germans what they think is the safest investment of all - which is also stable in value in extremely uncertain times - almost 90 percent of them answer: gold. Especially the younger ones, by the way, often agree with this statement these days.

This means that the precious metal is even more stable than its fiercest competition class, at least in the polls: real estate. It's not for nothing that they are called concrete gold, but in view of the skyrocketing purchase prices, many market observers no longer really believe that they are currently an extremely safe investment. But does gold live up to its reputation?

The fact is: if the gold price rises as it did last, many investors' eyes light up again. Because such a price increase - like every sudden increase before - is seen as evidence that gold is a brilliant investment idea. Almost 40 percent of young people under 30 are currently saying that they would like to buy gold now. In the case of the elderly, it is a little less, almost 30 percent, according to the market watchdogs of the consumer advice centers recently in a representative survey. But that's still huge approval ratings.

Germans love gold

And even if the actual purchase numbers are of course lower than these declarations of intent: a lot of German citizens actually invest in gold. That is why, according to statistics from the World Gold Council, the Germans were recently considered to be world champions of gold buyers, at least if you add up the proportion of bars, coins and gold funds sold.

One can marvel at this love for gold investments, especially when one looks at the classic reluctance of local investors towards many other investments. Especially compared to those investments that fluctuate greatly in value. But that is exactly what the gold price does.

Perhaps most people simply forget that when the value of the precious metal rises as quickly and suddenly as it did this year: In fact, almost nothing has moved on the gold front for years. Then came March 2019 and a new high-altitude flight began. From March to August, gold rose from around 1,100 euros to almost 1,400 euros, a good 27 percent. Calculated in dollars, it even cracked the magical 1500 mark again, which was extremely important for the market because it was considered an important upper limit. In the fact that it was breached, many saw a signal that things are now going up in the long term. It was a buy signal.

In the short term, gold was even quoted at around $ 1,550. But in the meantime its course has dropped again by almost six percent. But: For the year as a whole, investors were able to get a brilliant return with the precious metal, almost 20 percent would have been possible.

Gold price in dollars


source: tradingeconomics.com

Sounds great? Yes, especially if you look at the performance of the past: Over a three-year perspective, the precious metal achieved marginally more than this 20 percent, namely a mere 23 percent. Over ten years it was 32 percent. That means: almost all of the gains of the past ten years have been made by gold in the past twelve months alone. For the sake of fairness, however, one also has to say about the 19 percent price increase in 2019: The German Dax share index would also have been 18 percent plus.