Gold News

Investor Selling Hits Gold 1st Time Since Pandemic Began

Net outflow at world #1, investment buyers outnumber sellers...
 
A DROP in gold prices to the lowest monthly average since April has seen private investors become net sellers of the precious metal for the first time since the eve of the Covid pandemic, writes Adrian Ash at world-leading marketplace BullionVault.
 
But while the volume of gold selling outweighed investing demand by a small margin in September, the number of buyers continued to exceed the number of sellers.
 
That saw BullionVault's Gold Investor Index slip only to 54.7, down just 0.9 points from August.
 
The Gold Investor Index tracks the number of people starting or adding to their gold bullion holdings – all secured and insured in each BullionVault user's choice of London, New York, Singapore, Toronto or most popular Zurich – versus the number of people selling across the month.
 
A reading of 50.0 on this data series would signal a perfect balance.
 
The Gold Investor Index hit an 8-year high of 65.9 as the Covid Crisis hit financial markets worldwide in March 2020. It averaged 53.9 in the 5 years before then, and has averaged 58.0 in the 18 months since.
 
Chart of the Gold Investor Index, last 3 years. Source: BullionVault
 
As a quick glance at the gold price chart shows, summer 2021's doldrums in the bullion market have stretched into autumn.
 
That's also reflected in low numbers of first-time buyers and this small net sale of investment holdings.
 
The quantity of gold owned by BullionVault users shrank in September for the first time in 20 months, slipping 87.5 kilograms from end-August's new record total to finish 0.2% lower at 47.5 tonnes.
 
Silver's 14-month lows also saw net demand weaken, falling like the US Dollar price to its lowest since July 2020 with BullionVault users adding only 1.7 tonnes to their total holdings.
 
That grew silver holdings by 0.1% to set the 14th consecutive month-end record at 1,234.9 tonnes.
 
Together with another 1.5% increase in the quantity of investment platinum owned by BullionVault users, that saw the total value of client holdings start October worth $3.6 billion (£2.6bn, €3.1bn, ¥397bn).
 
Chart of the Silver Investor Index, last 3 years. Source: BullionVault
 
The Silver Investor Index also slipped marginally in September as the balance of buyers over sellers eased.
 
Down 0.8 points to 54.8 last month, the Silver Investor Index hit a series record of 75.1 as the grey metal's price sank to the cheapest since 2009 in March last year. The data averaged 52.8 across the 5 years before then, and has averaged 57.9 in the 18 months since.
 
Looking at new interest in precious metals overall, the number of first-time investors rose in September to a 3-month high at BullionVault – now used by over 98,600 people in 175 countries since opening in 2005 – but it came 54.8% below September 2020's count of new users and lagged the 5-year monthly average by 37.9%.
 
Why lower interest even at lower prices?
 
Gold and silver offers timeless alternatives to cash and debt investments. So prices are struggling in the face of Fed tapering and the wider turn towards higher interest rates worldwide.
 
But bullion's headwind from monetary policy is being countered by the strength of inflation however, plus the sudden nervousness in global stock markets.
 
Silver's strongest gains historically came as the cost of living accelerated, boosting its appeal as a natural hedge against inflation. Gold tends to do well when other assets do badly, and its appeal as investment insurance is likely to shine if this volatility in equities continues.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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