Price
Up, Gold Investing Up?!
GOLD INVESTING among Western households
grew last month for the first time since July, writes Adrian Ash at
BullionVault, widening even as prices hit multi-month highs.
That nixed an increasingly price-sensitive pattern of buying on
dips and selling a spike.
January marked only the second time since
Donald Trump won the White Housein November 2016 that private-investing
interest in gold improved as the gold price rose.
Last month also marked the first time since 2011 that the Gold
Investor Index – a unique measure of actual behavior among the world's largest
pool of people trading physical bullion online – rose in January.
Typically that's a strong month for bullion prices, with gold
now rising in 14 of the 20 New Years since the Millennium, inviting existing
owners to sell at least a little and lock in a gain.
January 2019's rise in the Gold Investor Index in fact came as the
metal extended its most sustained stretch of rising prices in more than nine
years.
On both a month-end and daily-average basis, gold prices finished
January with their fourth gain in a row for investors across the US, Eurozone
and UK – a run of broad-based strength not seen since autumn 2009.
With gold prices rising to spring 2018 levels in US Dollars and
near 2-year highs in both British Pounds and Euro terms, the number of private
investors selling gold on BullionVault – the largest online market for physical
precious metals – rose yet again last month, growing another 1.3% from
December's jump to the largest total in a year.
But the number of people buying gold grew faster, up 13.0% to a
3-month high at BullionVault – now caring for more than $2.0bn of client
property and used by over 70,000 people worldwide to trade physical precious
metals, held in wholesale-market approved bullion bars in each client's choice
of London, New York, Singapore, Toronto or (most popular) Zurich.
Together that boosted the Gold Investor Index for the first time
in 6 months, up to 52.6 from the 16-month low of 51.8 reached in December.
Last month's reading was hardly stellar however. So while private
investing in gold has risen so far in 2019, it remains relatively balanced
overall.
Yes, profit-taking by US and UK customers has now subsided as
investors get used to gold trading back above $1300 and £1000 per
ounce. But late-January's new 21-month highs in Euro terms above €1150 per
ounce spurred a fresh wave of selling from Eurozone clients.
Taking the other side, new interest in precious metals from
first-time gold investors jumped in January, with the number of new customers
at BullionVault beating 2018's monthly average by 25.9%.
Again, that's hardly stellar however. Despite the rise, January's
count of new first-time investors came only 2.8% ahead of the last 5 years'
monthly average.
France and the United States led last month's growth among
BullionVault's global client base, with the number of first-time French and US
users beating their 60-month averages by 73.4% and 9.7% respectively as the
gilets jaunes protests against President Macron continued and Donald Trump's
budget stand-off with the Democrat-controlled House created the longest-ever
shutdown of federal government services.
The UK in contrast was the weakest region in January, with the
count of first-time BullionVault users down 10.2% from its 60-month average
despite the political impasse between London and Brussels over Brext.
Silver prices also rose for US, Euro and UK investors in
January, reaching summer 2018 levels and inviting a 4.3% increase in the number
of sellers across the month compared to December, rising to the most since last
New Year.
As with gold however, the number of silver buyers grew faster, up
by 13.3% to a 3-month high to edge the Silver Investor higher from December's
22-month low of 50.1 to reach 50.5 in January.
By weight silver found net demand of 5.1 tonnes on BullionVault,
the most since last September saw the metal's price fall back to New Year 2016
levels.
That took total client silver holdings to a new all-time record of
753.9 tonnes.
Gold holdings in contrast retreated for a second month running,
falling by 63 kilograms as selling outweighed buying and taking total client
holdings – securely stored in each user's choice of London, New York,
Singapore, Toronto or (most popular) Zurich – to a 3-month low beneath 39.0
tonnes.
So what next? Short term, it might pay to note that February
hasn't been too shabby for gold, silver or indeed platinum price
gains over the last few years (if not quite as dramatic as January).
Private investors using BullionVault will no doubt remain cautious
on strong price rises, other things equal. But New Year 2019 has already
removed or lowered the hurdles of stable stock markets, tighter monetary policy
and bearish betting by speculative funds which gold faced in 2018. That could
leave geopolitical risk – last year's key support for gold – to drive prices
higher.
January's straw in the wind suggests political strife and worries
could boost demand even if, or maybe because, gold prices rise.
Did 'Safe Haven' Buying Spur
Gold Price Jump?
You'd think so reading news-wire headlines and the financial
pundits.
But last month's price surge – gold's steepest gains since the
UK's Brexit referendum shock of mid-2016 – in fact saw private investors take
profit and sell.
With global stock markets losing 7.7% across December – the MSCI
World Index's worst month since 2011 – speculators and ETF investors pushed
gold prices in US Dollar terms 5.2% higher.
In contrast, users of BullionVault – the world's largest online
marketplace for physical precious-metal investment – sold one-fifth of a tonne
net between them (222 kg).
Equal to 0.6% of all client holdings, that pulled the total now
stored in specialist vaults in each client's choice of London, New York,
Singapore, Toronto or (most popular) Zurich down to 39.0 tonnes from
end-November's new record high.
Compared to November, the number of people ending December with
more gold than they began rose 5.6%, but the number of net sellers across the
month leapt 75.8% to the most since January 2018.
Together that pushed the Gold Investor Index – a unique measure of
private-investor action in physical gold – down from 53.4 to just 51.8 in
December, its lowest reading since gold's 3.5% price jump of August 2017.
A reading below 50.0 would indicate more sellers than buyers
across the month.
Gold's summer 2018 price-drop saw the Gold Investor Index hit a
peak of 56.8 in July, its highest level since Donald Trump won the US
presidential election of late-2016.
In the 2 years since Trump entered the White House, the index has
now moved in the opposite direction to gold prices in 20 of those 24 months.
Contrary to news-wires headlines about 'safe haven' gold buying driving the
price higher, such price-sensitive behavior continued in December even as world
stock markets slumped.
- Sales
of American gold Eagle coins by the US Mint fell 93.0% from the same
month a year earlier;
- Sales
of gold by Australia's Perth Mint also fell, down 5.5% from November to
the weakest monthly total since June;
- Household
demand in No.2 consumer nation India also dropped, extending the
slump led by rising Rupee prices across 2018.
So who did push the gold price higher last month?
Gold-backed ETF trust funds expanded, suggesting new interest
from wealth managers finally catching onto the risks in the stock market only
as their clients' equity investments tumbled.
More dramatic was the turnaround in speculative
betting on gold futures and options – derivatives contracts which scarcely
ever involve any gold – switching from bearish to bullish and driving spot
prices higher in the process.
Private investors in physical gold, on the other hand, took a pass
on this so-called 'safe haven' rush. And who did the selling? Gold last month
traded higher than it did for two-thirds of the last 3 years in US Dollar
terms. And despite representing just 20.8% of BullionVault's client base,
customers who bought for the first time since gold prices bottomed at the end
of 2015 accounted for 36.8% of last month's net sellers.
December's rise in gold sellers was most acute in the UK and
Eurozone, where investors saw gold prices jump to the highest monthly averages
since mid-2017 after touching 2-year lows earlier this autumn.
So last month's sell-off was, in the main, profit-taking. No one
ever went broke taking a profit of course, and BullionVault enables private
investors to buy or sell at live wholesale prices whenever they choose, 24/7,
for no more than 0.5% commission.
But while the majority of active traders keep a 'core' holding
whatever the price – pending the next financial crisis and long-term bull
market in gold – such price-sensitive trading as we saw throughout 2018 and
especially in December does risk being caught without gold should the equity
sell-off now worsen and bullion extend its New Year surge.
Buy and hold could prove a smart strategy for 2019 given
the geopolitical, economic and financial risks this year brings.
Silver also saw the largest number of sellers last month since New
Year 2018, jumping 60.1% from November. But unlike gold, the number of buyers
fell as the grey metal's price rose to 4-month highs in Dollar terms, dropping
by 7.6%.
Together, that saw the Silver Investor Index fall to its lowest
reading since February 2017 as silver prices rose back to late-summer
levels, dropping to 50.1 to signal a near perfect balance of the number of net
sellers with net buyers across the month.
By weight demand and selling were also balanced, keeping
BullionVault users' total holdings unchanged from November's new record above
748 tonnes.
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