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Gold Investing Rallies, But Inflation Fading Say Precious Metals

Gold and silver prices agree with Fed, ECB...
DESPITE INFLATION rising the fastest in 3 decades for US and German savers this summer, private investing in gold remained quiet in August, writes Adrian Ash at market-leader BullionVault.
But while investment demand barely outweighed the volume of sales last month, the number of people buying gold rose sharply from July's pre-Covid lows.
Now caring for $3.8 billion of precious metals (£2.8bn, €3.2bn, ¥416bn) in 5 global locations for our international client-base, BullionVault saw the number of investors opting to sell gold rise 17.4% in August from what was also the fewest since the eve of the Covid Crisis.
The number of buyers in contrast rose 26.9% from July's 18-month low. Together that edged the Gold Investor Index – a unique measure of private trading in gold – up 1.4 points to 55.6 in August.
Peaking at an 8-year high of 65.9 in March 2020, the Gold Investor Index would read 50.0 if the number of people starting or adding to their personal gold holdings matched exactly the number of sellers across the month.
Chart of the Gold Investor Index, all data. Source: BullionVault
Despite the jump in headline inflation to multi-decade highs, the precious-metals market seems to agree with both Western central bankers and the bond market that this spike will fade. 
Long-term interest rates have barely moved, squashing the real yield on US debt to its most negative since 1980. Yet gold investing prices haven't jumped in response, suggesting that the bullion market got ahead of itself at last August's new highs above $2,000 per ounce.
Year-on-year, August saw gold's month-average price in US Dollars drop 9.4% from last summer's new record high.
That was the steepest annual drop since gold prices bottomed in New Year 2016 at the end of the precious metal's post-financial crisis bear market.
With gold prices dropping for the 3rd month running in US Dollar terms, the quantity of gold sold by BullionVault users fell 24.6% from the previous 12-month average.
Gross investing demand fell harder however, down 47.8% from the prior 12-month average and outweighing gross selling by just 32 kilograms, the smallest quantity since March saw the lowest net purchases since January 2020 at 24kg.
That took the total quantity of gold owned by BullionVault users in each client's choice of London, New York, Singapore, Toronto or (most popular) Zurich reach reach its 18th consecutive month-end record at 47.6 tonnes, worth $2.8bn (£2.0bn, €2.3bn, ¥305bn).
Chart of the Silver Investor Index, all data. Source: BullionVault
Silver also saw a rebound in buyers outpace sellers in August as the price of the more industrially-useful precious metal fell steeply in Dollar, Euro and Sterling terms.
The number of silver sellers rose 8.2% from July's 19-month low, but the number of buyers rose twice as fast, up 16.9% from its 16-month low.
Together that pushed the Silver Investor Index up 1.0 point to 55.4 as net demand added 11 tonnes to total client holdings, setting the 13th consecutive month-end record at 1,233 tonnes, now worth $953m (£692m, €805m, ¥104bn).
Overall, August saw the number of first-time precious metals investors on BullionVault rise 17.8% from July's drop to the lowest in 2 years, but it remained sharply lower from the 2020 Covid Crisis' record pace of new acquisition.
Crisis aside, summer is typically quiet for new investment demand in precious metals, and 2021 has been no exception. Gold investing is finding new interest, but the precious metal is caught between a very confused economic outlook and the relentless new record highs in world stock markets.
Among private investors, that's reflected in smaller buyers outnumbering but only just outweighing larger sellers choosing to take profit or move money into other assets.

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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