Gold News

Gold Investing Leaps on Price Plunge

Investing jumps like mid-2020 on sharp gold price drop...
 
GOLD just made its steepest US Dollar price fall in over 5 years, writes Adrian Ash at BullionVault, the leading online and smartphone marketplace for physical precious metals.
 
That spurred the fastest jump in gold investing since summer 2020, and it took BullionVault client holdings up to a new all-time record as self-directed investors bought gold as a hedge against inflation, stock-market risk and the worsening economic outlook.
 
The gold price in US Dollar terms averaged a 5.3% discount in July compared to June at $1736 per ounce – the cheapest month-average price in 16 with the steepest drop since December 2016.
 
Last month's price drop saw the most people buy gold on BullionVault since March this year, up 27.9% from the month before. The number of gold sellers in contrast fell 10.3% to the fewest since December.
 
Together, that took the Gold Investor Index – a unique measure of private-investor behaviour in physical precious metals – up to 56.8, its highest reading since June last year.
 
Chart of the Gold Investor Index, 3 years to July 2022. Source: BullionVault
 
The Gold Investor Index would read 50.0 if the number of people selling gold across the month exactly balanced the number who bought. It set a decade high of 65.9 as the Covid pandemic went global in March 2020.
 
This July's month-on-month increase of 2.3 points was the index's steepest rise since August 2020, the month that US Dollar gold prices set their current all-time peak.
 
Gold demand by weight, net of customer selling, also jumped on July's price drop, reaching the heaviest inflow since June 2021 on BullionVault at 0.2 tonnes.
 
That took the total quantity of gold now securely vaulted and insured for BullionVault users in each customer's choice of London, New York, Singapore, Toronto or Zurich up to a new record above 47.7 tonnes, now worth $2.7 billion (£2.2bn, €2.6bn, ¥361bn).
 
Gold's price drop in July was markedly smaller for Euro and British Pound investors than it was in US Dollars, pulling the precious metal's month-average value down by 1.8% and 2.8% respectively to 5-month lows at €1706 and £1449 per ounce.
 
New interest in precious metals meanwhile continued to be muted worldwide, extending the typical summer lull with the monthly count of first-time users on BullionVault rising just 2.4% from June's 11-month low.
 
But while new interest from first-time buyers remains seasonally weak, self-directed investors already exposed to precious metals have leapt on gold's steep price drop to build their holdings.
 
This summer's surge in private gold investing contrasts with professional investors running other people's money. They continue to cut gold ETF holdings as speculators turn bearish on Comex futures and options, betting that prices will fall further as central banks edge interest rates higher in the face of inflation running at 4-decade highs.
 
All that rate hikes have achieved so far is to raise the odds of recession. The poor economic outlook is one reason investors are choosing to buy gold according to BullionVault's mid-2022 survey. Polling 15.3% among our respondents, that's topped by the need to diversify a wider portfolio of shares, bonds and property with 33.9%, and led in 2022 by inflation as the No.1 motivation for investing in bullion at 39.2%.
 
On average, respondents to BullionVault's survey forecast that gold prices will rise to $1961 by New Year's Eve. A gain of 10.6% from current levels, that would mark gold's 2nd new record year-end price in 3 years.
 
Chart of the Silver Investor Index, 3 years to July 2022. Source: BullionVault
 
Silver prices fell twice as hard as gold in July, losing 11.2% on a month-average basis in Dollar terms, the steepest drop since the Covid Crash in commodity prices of March 2020.
 
Like gold, that spurred a rise in private investing, with the number of silver buyers leaping by 45.9% to reverse June's sharp drop. Silver sellers meanwhile slipped by 9.0% from the month before, dropping to the fewest since December 2019.
 
Together that took the Silver Investor Index back up to May's reading of 56.0, the highest since June last year.
 
Silver demand was also strong by weight, totalling 12.0 tonnes net of client selling and taking the total now stored and insured for BullionVault users (and confirmed by the Daily Audit of silver bullion which reconciles the independent custodians' bar lists with the full list of client holdings) up to the 2nd highest month-end ever at 1,250 tonnes now worth $806 million (£661m, €787m, ¥108bn).
 

Adrian Ash

Adrian Ash, BullionVault Gold News

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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