Gold as an Investment Asset – History, Significance, and Modern Investment Strategies

Authenticity of Gold – Fake Gold, Fool’s Gold and Modern Testing Methods

• Real gold: Element Au, atomic number 79, chemically extremely stable.
• Fool’s gold: Pyrite (iron sulfide), visually similar, but worthless.
• Gold plating: Thin layer of gold on a base metal.
• Tungsten counterfeits: Particularly dangerous because of a density similar to gold.

Modern testing procedures:

1. Density test
2. Magnet test
3. Ultrasound measurement
4. X-ray fluorescence analysis (XRF)

The Philosopher’s Stone – The Ancient Dream of Producing Gold

Since antiquity, alchemists in China, the Arab world, and Europe tried to achieve what seemed impossible: the transformation of base metals into gold. At the center of these efforts was the legendary “Philosopher’s Stone” – a mythical substance that was supposed not only to refine metals, but also to heal illness and grant eternal life.

Modern physics has fulfilled this dream in a certain sense: through nuclear transmutation, individual atoms of mercury or platinum can actually be converted into gold. However, this process requires particle accelerators, enormous amounts of energy, and the highest technological precision. The cost of producing even a few milligrams of gold exceeds the market value of the produced metal many times over – artificial production is therefore practically and economically meaningless.

It is precisely this near impossibility of reproduction that contributes decisively to the intrinsic value of gold. While paper money, digital balances, or even many raw materials can be expanded at will, the supply of gold remains strictly limited by physical and geological factors. Global annual production increases by only about 1.5 to 2 percent – an extremely slow growth compared to modern monetary systems.

Time and again, attempts have been uncovered to bypass this natural scarcity through counterfeiting. Particularly sensational was the discovery of tungsten-filled gold bars in international trading circles in the early 2010s. Tungsten has almost the same density as gold and is therefore ideal for fraud attempts. Only modern ultrasound and X-ray procedures made it possible to reliably identify such fakes.

The “Philosopher’s Stone” thus remains a symbol: for the human longing for unlimited wealth, for the dream of technological omnipotence – and at the same time for the realization that true scarcity cannot be created at will. It is precisely this natural limitation that makes gold one of the most trustworthy and stable assets in the world to this day.

Gold Deposits Worldwide – Proven and Estimated

Worldwide, approximately 208,000 tons of gold have been mined. The majority still exists today in the form of jewelry, coins, and bars.

Global Gold Holdings and Central Banks in a Gold Rush

Central banks hold over 35,000 tons of gold. Since 2010 we have observed a strong rebuilding of reserves – especially by China, Russia, India, and Turkey.

Background:

• De-dollarization
• Geopolitical risks
• Loss of confidence in paper money

De-dollarization – Moving Away from the US Dollar as Global Reserve Currency

Since the end of the Bretton Woods system in 1971, the US dollar has effectively functioned as the world’s reserve currency. The majority of global trade, especially in commodities (oil, gas, metals), is conducted in dollars. This system gives the USA enormous geopolitical and economic advantages.

But this system is beginning to erode.

Why Countries Are Avoiding the Dollar

Several developments are accelerating the move away from the dollar:

• US sanctions policy (freezing of dollar reserves, e.g., Russia 2022)
• Political instrumentalization of the financial system
• Exploding US national debt
• Permanently expansive monetary policy of the Federal Reserve

For many states this means: dollar reserves are no longer a neutral asset, but a political risk.

Gold as a Neutral Alternative

Gold has characteristics that no currency offers:

• no counterparty
• no issuer risk
• cannot be sanctioned
• accepted worldwide

Therefore many countries are reducing their dollar holdings and systematically increasing their gold reserves – especially China, Russia, India, Iran, Turkey, and many BRICS states.

De-dollarization is not a short-term trend, but a strategic reorganization of the global financial system.

Gold Standard, Bretton Woods and the Question of a Return

The history of the modern monetary system is inseparably linked to gold. For centuries, gold formed the basis of national currencies and international trade relations. Only in the 20th century was this connection systematically dissolved – with far-reaching economic and political consequences that continue to shape the global financial system today.

“Give me control of a nation’s currency, and I care not who makes its laws.”

The Classical Gold Standard

Under the classical gold standard (around 1870–1914), every major currency was directly convertible into a fixed quantity of gold. States committed themselves to exchanging banknotes for gold at any time. This created a stable international monetary system with fixed exchange rates and limited expansion of the money supply.

• Gold functioned as ultimate money
• States were forced to maintain budget discipline
• Inflation remained low in the long term
• International trade flows were stable

This system collapsed with the First World War, when governments suspended the gold link in order to finance massive war expenditures.

Bretton Woods – The Last Gold Anchor

In 1944 a new world monetary system was created in Bretton Woods. The US dollar became the leading currency, all other currencies were pegged to it, and the dollar in turn was convertible into gold at a fixed rate of 35 USD per troy ounce – but only for foreign central banks.

This system gave the USA enormous power, but also led to massive imbalances as the USA printed more and more dollars than were backed by gold.

The Nixon Shock and the Beginning of the Fiat Money System

On August 15, 1971, US President Richard Nixon ended the convertibility of the dollar into gold. The so-called “Nixon Shock” marks the beginning of today’s unbacked fiat money system.

Since then, the global monetary system has been based solely on trust in state institutions – without material backing.

Is a Return to the Gold Standard Possible?

A complete return to the classical gold standard is considered extremely unlikely under today’s political conditions. The gold standard enforces budget discipline and limits government spending – characteristics that would take considerable power away from modern governments.

Nevertheless, discussions about alternative models are increasing:

1. Partial gold backing of national currencies
2. Gold-backed digital currencies
3. Commodity-backed currency alliances
4. Bilateral trade agreements based on gold

Geopolitical Importance of Gold in the New Monetary System

Many states are preparing for a multipolar monetary system. In this context, gold is once again gaining central importance as a neutral reserve instrument.

• Protection from sanctions policies
• Hedging against dollar instability
• Strengthening monetary sovereignty
• Anchor of trust for their own currency

Gold is not only a commodity or investment asset, but the historical foundation of the global monetary system. The development from the gold standard through Bretton Woods to today’s fiat money system explains why gold is increasingly coming back into focus of state financial strategies in the 21st century.

Whether there will be a formal return to gold-backed currencies remains open. What is certain, however, is that gold remains the last universal trust between states.

Performance: Gold Compared to Stocks and Bonds

The following chart shows long-term performance (indexed: 1970 = 100):

In the long term, gold clearly outperforms inflation, but usually lags behind stocks – with lower volatility.

What Drives the Demand for Gold?

• Jewelry industry (~50%)
• Investment (~30%)
• Central banks (~15–20%)
• Industry (~5–10%)

Private demand is deeply rooted culturally (India, China, Middle East) and more stable in the long term than politically motivated central bank purchases.

Gold in Use – Industry, Medicine and Culture

Gold is not only an investment and jewelry metal, but also an important industrial raw material. Every year several thousand tons of new gold demand arise worldwide. A significant part of this does not come from investors or central banks, but from real applications in technology, medicine and culture.

Jewelry – the Largest Demand Sector

Around 45–50 percent of global gold demand traditionally comes from jewelry manufacturing. Especially in Asia, gold jewelry has a dual function: it is both decorative and a long-term store of value.

• India and China are by far the largest jewelry markets
• In India often more than 600–800 tons of gold are processed into jewelry each year
• Typical alloys are 22 karat (91.6%) or 18 karat (75%)
• Jewelry is often passed down through generations

In many cultures, gold jewelry replaces a kind of private pension system. It can be sold, melted down or used as collateral at any time.

Cultural Significance: Gold as Dowry

In many countries of the Middle East and South Asia, gold plays a central social role. Heavy bracelets, chains and gold coins are especially common as part of the dowry at weddings.

• In India gold is traditionally part of almost every wedding ceremony
• In the Arab world massive bracelets are considered wearable wealth
• In Turkey gold coins (“Altın”) are often given as wedding gifts
• In Vietnam and Thailand gold is often kept as a family emergency reserve

This culturally rooted demand is remarkably stable and contributes significantly to the long-term value retention of gold.

Microelectronics and High-Tech

About 7–10 percent of annual gold demand comes from industrial applications – especially from electronics. Gold has unique physical properties:

• extremely good electrical conductivity
• corrosion resistance
• chemical stability
• workability in microscopic layers

Therefore gold is found in almost every modern electronic device:

• smartphones and tablets
• computer processors
• circuit boards and contacts
• satellite and aerospace technology

A single smartphone contains only about 30–40 milligrams of gold – but with billions of devices worldwide this creates considerable overall demand.

Medical Applications

Gold has been used in medicine for centuries and still plays an important role today:

• coatings for pacemakers and medical sensors
• treatment of certain rheumatic diseases
• gold nanoparticles in modern cancer therapy
• precision instruments in surgery

The extreme biocompatibility of gold makes it particularly suitable for implants and medical devices.

Dentistry – Former Standard, Today a Special Application

For decades gold was the preferred material for dental fillings and crowns. Although the use has declined due to new ceramic and plastic materials, gold remains in demand in certain areas due to its durability and compatibility.

• very long lifespan
• high precision and stability
• excellent biocompatibility

Summary

Gold is far more than a pure investment asset. Its use in technology, medicine and culture creates a broad, real base demand. These diverse applications – combined with the limited natural availability – form an essential foundation for the lasting value of the metal.

Physical Gold or Financial Product?

Investors can own gold either in physical form or participate in price development through various financial instruments. Both approaches differ in terms of security, risk, liquidity and dependence on the financial system.

Gold Futures

Gold futures are standardized forward contracts traded on exchanges such as COMEX. They oblige buyers and sellers to deliver a defined amount of gold at a specific future date at a previously fixed price.

• COMEX Gold Future (GC)
• Trading size: 100 troy ounces
• High leverage, high risk
• Mainly used by institutional investors

Gold Options

Options on gold futures or gold ETFs allow investors to speculate on rising or falling prices or to hedge existing positions.

• SPDR Gold Shares (GLD) Options (ISIN: US78463V1070)
• COMEX Gold Options
• High flexibility but complex pricing

ETCs (Exchange Traded Commodities)

Gold ETCs are among the most popular investment vehicles for private investors. They track the gold price and are traded like stocks on exchanges.

ETCs with physical delivery claim such as Xetra-Gold or EUWAX Gold II offer particularly high security because they grant a documented right to physical delivery of the stored gold and are therefore not merely a promise of payment.

Certificates and Warrants

Certificates and warrants are structured products issued by banks that replicate or leverage the performance of the gold price. However, they are subject to issuer risk.

• Gold Open-End Certificate (WKN: GG0WKN)
• Gold Turbo Long/Short (e.g., WKN: HG1XYZ)
• Gold Mini-Futures (various issuers)

These products are mainly suitable for short-term traders, not as a long-term store of value.

Summary

Physical gold ownership offers maximum independence from the financial system, while financial products provide high liquidity and flexibility, but are always associated with counterparty risks.

Physical Gold – Forms and Recommendations

Physical Gold – Forms, Sizes and Cultural Significance

Does it have to be the Krugerrand? The South African Krugerrand is the world’s most famous investment coin – but by no means the only sensible choice.

Advantages of the Krugerrand

Comparison with Other Investment Coins

Krugerrand Is Not Without Alternatives

It is not the name that counts – but acceptance, purity and tradability. A mix of several internationally recognized coins increases flexibility.

Which Bar Size Makes Sense?

Recommended Sizes

Professional Recommendation:

A combination of 1 kg / 100 g / 10 g = optimal balance of cost and flexibility.

Buying Bread with Gold in War? – Reality of 1g Pieces

The idea of buying bread with 1g of gold in a crisis is theoretically attractive, but practically of limited realism.

Problems:

• hardly anyone can properly verify 1g gold
• high value compared to everyday goods
• change problem

Realistic Use:

• exchange for medicine, transport, documents
• bribery, financing escape
• border crossing, bribing officials

Gold is not a substitute for cash, but insurance in case cash fails. For everyday use in crises, silver coins are far more practical.

Gold Jewelry – Investment, Culture and Mobility

In many cultures (especially India and the Middle East), heavy bracelets represent a wearable reserve of wealth:

• 22–24 karat gold
• can be melted down at any time
• intergenerational value storage
• part of the dowry

Gold jewelry functions there as a private bank account – visible, wearable, mobile.

Cultures with the Highest Value Placed on Gold

In India, for example, an estimated more than 25,000 tons of gold are in private hands – more than all central banks in the world combined.

Anonymous Purchase of Physical Gold – Possibilities and Limits

Many investors are interested in the anonymous purchase of physical gold. The desire for discretion is understandable: gold is considered private asset protection and is often intended to be kept outside the digital financial system. Nevertheless, gold trading in Germany is subject to clear legal rules.

Identification Requirement Under the Money Laundering Act

The anonymous purchase of precious metals is only possible up to a legally defined cash limit. This limit has been lowered several times in recent years:

• Until the end of 2019: anonymous purchase possible up to 10,000 EUR
• From 2020: reduction to 2,000 EUR
• Since 2023: identification required from 1,999.99 EUR

In concrete terms this means: anyone buying gold worth 2,000 EUR or more – whether in cash or by bank transfer – must identify themselves to the dealer with a valid ID document. The dealer is obliged to record name, address and ID data and keep them for audit purposes.

Buying “Dealer to Dealer” – Is That Possible?

In practice the question often arises whether one can use the maximum amount for anonymous purchase several times by visiting different dealers in succession. Legally this is generally possible:

There is no law that forbids a private individual from making several purchases below the identification limit at different dealers.

As long as each individual purchase remains below 2,000 EUR and they are not obviously related transactions at the same dealer, there is formally no identification requirement. Many investors use this possibility to acquire smaller amounts of gold anonymously over a longer period.

Limits and Risks of This Practice

Nevertheless there are practical restrictions:

• Dealers may still demand identification if circumvention is suspected
• Large total amounts can only be acquired this way with considerable effort
• When selling larger amounts later, proof of origin may be useful or necessary
• Frequent cash transactions can attract attention from banks or authorities

It is also important to note: anonymity only relates to the purchase process. Anyone selling gold later usually has to identify themselves – especially in online sales or for amounts above cash limits.

Anonymous Purchase Is Possible

The anonymous purchase of gold is still possible in Germany, but only to a very limited extent. For larger asset amounts there is practically no way around full identification today.

Tax Aspects When Selling Gold (Including Xetra-Gold vs. EUWAX Gold II and International Alternatives)

A central advantage of physical gold compared to many other investments lies in its tax treatment. In Germany, physical gold (bars/coins) is generally treated as a private sale transaction: if it is held for more than one year, profits from its sale are usually tax-free. If sold within the 12-month period, profits can be taxable (usually at the personal income tax rate; tax-free allowances apply within the framework of private sale transactions). Note: The following is not tax advice, but a professional assessment.

The “One-Year Rule”: Physical Gold vs. Securities

For classic securities investments (individual stocks, ETFs, bonds), profits are typically subject to capital gains tax, whereas physical gold can be tax-privileged if held long enough. Therefore, gold-related financial products are particularly interesting if they are treated like physical gold for tax purposes.

Xetra-Gold: Maximum Tax Certainty Through Court Rulings

For Xetra-Gold (ISIN DE000A0S9GB0) there is particularly solid case law: the German Federal Fiscal Court (BFH) has clarified in several decisions that Xetra-Gold is to be treated in key respects like the direct acquisition and sale of physical gold, because the product represents a contractual delivery claim to physical gold and not merely a promise of payment. A central reference is the BFH ruling of 12.05.2015 – VIII R 35/14.

Additional BFH rulings on Xetra-Gold (including VIII R 4/15 and IX R 33/17) further reinforce this classification.

EUWAX Gold II: Delivery Claim Yes – But Less “Court-Tested” Than Xetra

EUWAX Gold II (ISIN DE000EWG2LD7) is also structured as a bearer bond and advertises that it is backed by physical gold and provides a delivery claim. The product documentation explicitly describes this right.

The difference, as many investors see it: while Xetra-Gold is supported by prominent BFH case law, the tax treatment of EUWAX Gold II is often based on the argument that it is comparable and therefore should be treated in the same way. Many investors nevertheless feel that Xetra-Gold offers greater legal certainty.

Spreads: Why Xetra-Gold Is Often Cheaper to Trade

In addition to tax issues, the spread (difference between bid and ask price) plays a major role with ETCs. Xetra-Gold typically has a very tight spread, while EUWAX Gold II is often reported to have a noticeably wider spread depending on market conditions.

Practical Conclusion

• Highest tax certainty: Xetra-Gold
• Trading costs: Xetra-Gold often advantageous
• International alternatives: exist, but require case-by-case evaluation

Storage – Security vs. Accessibility

Bank Safe Deposit Box

The classic bank safe deposit box is considered by many investors to be the natural choice for storing gold. It combines professionalism, insurance and organization – but also certain risks.

Advantages

• High physical security (massive vault systems, access controls, surveillance)
• Discretion (the bank does not know the contents)
• Insurability

Disadvantages & Risks

• No immediate access (only during opening hours)
• Potential restrictions in crises
• Theoretical state interventions possible

Practical Risk

The incident in Gelsenkirchen (29.12.2025): more than 3,000 broken into safe deposit boxes show that even bank vaults are not absolutely secure.

Private Safe (At Home)

Home storage means maximum control – but also maximum responsibility.

Advantages

• Immediate access
• Full discretion
• No ongoing costs

Disadvantages

• Risk of burglary
• Personal risk in case of robbery
• Fire and natural hazards

Hiding on Your Own Property

The oldest method – independent and anonymous.

Advantages

• Maximum independence
• Absolute discretion

Risks

• Total loss possible
• Environmental risks
• Theft risk

Specialized High-Security Storage

Professional vault services offer the highest level of security.

Advantages

• Highest security standards
• Legal protection
• International diversification
• Insurance included

Disadvantages

• Costs
• Dependence on providers

Strategic Recommendation

Many professional investors combine several methods:

“Distribute your gold as you distribute your risk.”

Gold Remains the Foundation of Every Wealth Strategy

Gold is not speculation, but insurance. It protects against inflation, currency devaluation and systemic crises. In a world of growing uncertainty, gold remains one of the few truly global assets of trust.