Gold News

Gold Sentiment Eases Fast, But Positive

More buyers but bigger sellers as spring's surge in gold demand fades...

SINCE April's plunge in gold prices, the fastest drop in 30 years, writes Adrian Ash at BullionVault, the surge in demand from Western households has been met much faster than amongst Asian investors.

The 15% crash unleashed demand for physical gold worldwide. Would-be buyers in the Far East are still facing shortages and high local premiums. But household demand for gold bullion in Europe and North America has eased back almost as fast as it appeared. A fall in our Gold Investor Index was only to be expected.

What does the Gold Investor Index show? BullionVault is the largest online provider of physical gold ownership to Western households. It lets people buy and sell physical gold, as they choose, live over the internet in open competition. The index takes the number of net buyers, meaning those users who added to their gold holdings over the last month, and subtracts the number of net sellers.

As we explain in this article for the London Bullion Market Association's quarterly Alchemist magazine, that figure – the balance of net buyers over net sellers – is then measured as a proportion of everyone who already owned gold at the start of the month. The index level signaling no change is 50.0, meaning a perfect balance of buyers and sellers, with sentiment amongst self-directed private investors neutral overall.

So the May 2013 reading of 53.0, although down 9.6% from April's 16-month high, still shows retail investor sentiment remaining positive towards gold. That's despite the uptick in both interest rates and the stock market. BullionVault's data show that a growing number of people are adding gold to their savings.

But while sentiment is positive, Western households remained net sellers of gold overall. That extends the pattern from April, with some larger investors tactically reducing the size of their position while the total number of gold owners continues to grow. All told, gold holdings on BullionVault were reduced by 1.1%, down to 32.4 tonnes held in specialist storage in London, New York, Zurich and Singapore.

So it's clear that a number of long-term holders are choosing to take a step back for now, reducing their investment in gold but keeping an eye on what is to come. If the perception of crisis recedes further, this may well continue. Coupled with fresh buying by new investors, however, the deeper trend may be away from fewer heavily concentrated holdings, towards wider gold ownership as a core financial hedge.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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