Gold News

UK Set for 'No Fear Brexit' Says Weak Gold Investing

New UK gold investing -82% vs 2016 referendum...
 
With BREXIT now barely 3 weeks away, 29 March holds no fear for UK investors and savers, writes Adrian Ash at BullionVault.
 
How else to explain last month's near 12-year low in new gold investing among UK households?
 
BullionVault is the largest physical precious-metals market for private investors online. UK residents account for half our global client base, which in total now owns $1.6 billion worth of gold bullion (£1.2bn, €1.4bn, ¥184bn), all stored securely in each client's choice of London, New York, Singapore, Toronto or Zurich.
 
That outweighs most holdings at national central banks, and it's a larger allocation than all but 12 of the world's 111 gold-backed ETF trust funds represent.
 
So what's happening to sentiment and confidence among this market-leading pool of private gold investors right now?
 
On a daily basis, last month saw the pace of new UK account openings fall to its weakest since the summer of 2007, back before the banking run on Northern Rock marked the start of the global financial crisis.
 
Compared to June 2016, when the Brexit referendum spurred the strongest new UK account openings since the financial crisis peaked with the English riots of summer 2011, last month's daily pace fell to less than one-fifth (-82.1%).
 
As well as UK households expecting a 'no fear' Brexit, the rally in world stock markets perhaps plays a part. (Who needs gold when equities rise? Other than investors insuring their wealth.) Gold's high price might also be weighing against confidence among new would-be buyers.
 
Gold bullion rose 1.3% in Sterling terms last month, reaching its highest monthly UK Pound gold price per ounce since October 2016 at an average £1015.
 
But the metal also rose for a 5th consecutive month for US Dollar and Euro investors, adding 2.2% and 2.8% to reach 10-month and 22-month highs respectively at $1320 and €1163.
 
Moreover, while new UK account openings fell by nearly one-third (-30.8%) in February from the previous 12-month average, in Germany – where new data continue to show the economy slowing – last month's daily pace of new precious-metal account openings on BullionVault rose 11.4% from the 12-month average. It rose 65.9% in France, where the gilets jaunes protests have now continued nationwide for 16 weeks.
 
Across BullionVault's global client base as a whole, February's rising gold price saw the total number of gold buyers – including existing customers as well as new users – fall 9.3% from January's 3-month high. The number of sellers also dropped however, down 6.0% from the New Year's 12-month peak.
 
Together that trimmed the Gold Investor Index – BullionVault's unique measure of private investor sentiment towards physical gold, measured solely from actual trading decisions – to 52.2 from the 52.6 rebound in January. A reading of 50.0 would signal a perfect balance between the number of buyers and the number of sellers across the month.
 
Silver prices also rose in February, gaining 1.4% in Dollar terms to reach the highest monthly average since June at $15.81 per ounce.
 
The number of silver buyers fell 9.1% from January's 3-month high but the number of sellers fell harder still, down 19.9% from the New Year's 12-month high and retreating to the fewest since November despite silver prices averaging $1.44 more per ounce.
 
Together that edged the Silver Investor Index up to 51.0 from January's 50.5 reading.
 
By weight client silver holdings were unchanged overall at January's new all-time record above 753 tonnes.
 
Gold holdings in contrast fell for the 3rd month in a row, dropping by 151 kilograms as customers were net sellers by weight once again.
 
That extended the liquidation of BullionVault client gold hoding to 0.4 tonnes from November's fresh record highs, cutting the total – vaulted securely in each client's choice of London, New York, Singapore, Toronto or Zurich – down below 38.8 tonnes.
 
Profit-takers led this selling, because one in every four of February's gold sellers first bought in either 2017 or 2018, when prices averaged 4.4% less than last month in Dollar terms.
 
From the lowest gold prices of 2017-2018 in fact, last month's average price offered a gross profit of 10.6% for US or UK investors, and 13.2% in Euro terms.
 
Bottom line? People tend to invest in gold when they fear trouble ahead, whatever the price. That means UK households see little to fear from Brexit today.
 
Contrast the heavy household investing on  gold's all-time highs of summer 2011, or again in June 2016 – when the shock Brexit referendum result sent gold soaring 22% in Sterling terms inside 6 hours.
 
If British households were at all worried (whether rightly or wrongly) by 29 March 2019's Brexit deadline, new demand to invest in gold would be far stronger.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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