Banking crisis looming-ECB warns of gold collapse. What you need to know.

The European Central Bank (ECB) is sounding the alarm:

Something dangerous is brewing on the gold market. The central bank fears that there will soon be supply problems with consequences for the entire financial world.

More and more investors are buying so-called gold contracts, where real gold must actually be delivered at the end. This also means that the gold has to be physically transported often across the Atlantic, for example from London to New York.

The problem now is that demand has increased so much that there are shortages. The ECB's four economists are even warning of a ‘short squeeze’ a dangerous domino effect, if too many investors demand real gold, banks could come under pressure.

A ‘short squeeze’ in gold is a stock market phenomenon that occurs when many market participants speculate on falling gold prices (i.e. have gone short), but the price of gold suddenly rises, leading to buying pressure that pushes the price even higher.

In the worst-case scenario, losses in the billions or even bankruptcies are imminent. Geopolitical tensions also play a role. Countries such as Russia and China are increasingly focussing on gold instead of the US dollar. The economists at the ECB are worried: If large quantities of gold suddenly have to be delivered, many banks will falter. The good news is that gold itself remains a safe haven, especially in the event of inflation, war or economic crisis. This is why investors are fleeing to the precious metal right now. The bad news: not every gold investment is equally safe. Anyone who only owns ‘paper gold’, i.e. gold on paper that may not even exist, could come away empty-handed in an emergency, as the ECB warns.

So the ECB is not worried about gold itself - but about the chaos that arises when too many investors demand real gold that cannot be delivered immediately.

How the price of gold has developed
In March 1980, the price of a troy ounce was still 455.56 euros.

As a result of the financial crisis in 2007/08, the price of gold rose significantly and reached 776 euros per troy ounce.

In December 2012, it climbed to an all-time high of 1371 euros.

Shortly after the outbreak of the coronavirus pandemic, the price finally broke through the EUR 1596.80 per troy ounce mark.

Following the Russian war of aggression against Ukraine, the price of gold climbed to EUR 1785 in April 2022. As at 11 June 2025, the price per troy ounce is 2915.38 euros.

Should I still invest in gold now?
The price of gold has risen rapidly in recent months - at times to over 3,500 US dollars per troy ounce. Many investors are therefore asking themselves: is now the right time to invest in gold? In their video analyses, experts such as precious metals trader Alexander Zumpfe from Heraeus and gold experts Markus Bußler and Tim Schieferstein recommend holding gold in the portfolio as a long-term hedge. But investors should take a close look at what they are actually buying. No more than 10 to 15 per cent of assets should be invested in gold and spread across several forms of investment. It is wise to enter the market in stages, i.e. not to buy everything at once. This allows the risk to be better spread. If you really want to play it safe, you should buy physical gold (such as bars or coins) or only invest in products that are actually backed by gold.

Bars and coins are available from banks or gold dealers, jewellery from jewellers. Important to know. In Germany, you must show your ID if you buy jewellery worth 2,000 euros or more. Reason: money laundering regulations.

Francis Tawiah (Duisburg, Germany)