Gold Investing Fever Cools Fastest in 14 Years

Silver sentiment also sinks as first-time investing halves...

GOLD INVESTING sentiment sank from a post-pandemic high in April, making its sharpest fall since the end of the global financial crisis on the Gold Investor Index, writes Adrian Ash at BullionVault.

This unique indicator of private investment decisions tracks the number of gold buyers versus sellers on the world's leading precious metals marketplace, now used by over 130,000 people and caring for $9.2 billion (£6.8bn, €7.9bn) of securely-stored gold, silver, platinum and palladium for its clients.

March's start to the Iran War, plus a sharp drop in the price of bullion, saw the Gold Investor Index reach its highest reading since the Covid lockdowns of 2020. But it then made its fastest drop since January 2012 last month as the price of gold slowed its descent from this New Year's spike to fresh all-time highs.

Gold fever is finally cooling, in short. And while global gold investment sentiment remains above its long-term average, it's just retreated at the fastest pace since the global financial crisis began to recede 14 years ago.

Driving that, the number of first-time investors in physical precious metals fell in half last month from March on BullionVault. But so too did the weight of profit-taking by existing owners of gold.

So net-net, private investors are buying gold at these lower prices. Just without the fireworks or noise of the New Year's historic rush.

After March's crash in gold prices drew a record number of buyers on BullionVault, the Gold Investor Index fell in April to its lowest reading since last November at 55.1, dropping 5.6 points from March's 67-month high.

While last month's reading was almost one whole point above the Index's 5-year average (54.2), the fall matched the index's drop of May 2013 − when gold prices briefly stabilized during that spring's record crash − with the steepest decline since the 11.0-point plunge of January 2012, when real estate prices began to recover from the financial crisis alongside economic growth and global stock markets.

Running since 2009 and peaking at 60.7 this March − the highest since August 2020 − the Gold Investor Index signals that buyers outnumber sellers with any reading above 50.0. The index set a series low of 47.5 in March 2024 and a record high of 71.7 in September 2011.

When that early 2010s' gold fever broke, it left investors who'd bought at the peak of the financial crisis out of pocket for almost a decade. Now gold has plainly entered a period of flat if not falling prices as the market cools once more.

But what's different today is that the long-term drivers of gold's underlying bull market remain very much in place.

Central banks continue to build their gold reserves as trust and political alliances break down. Government debt, currency debasement, and the need to diversify investment risk are only worsening as the return of Trump's trade war collides with the Iran conflict's energy-price shock.

Down in the detail, the number of new first-time users on BullionVault almost halved in April from March's count, down by 45.9% to the fewest since August but still running well over one-third above the past 5 years' monthly average (+37.8%).

Global trading volumes using BullionVault's low-cost access to wholesale gold also halved from March, down 51.6% by value to $188 million (down 52.0% in GBP to £140m, down 52.2% in EUR to €161m) and falling to one-sixth of January's record gold trading volume.

The weight of profit-taking among existing gold owners halved as well last month from March (-52.7%), helping net demand run positive for the 2nd month in a row. That grew the total quantity of gold now belonging to BullionVault users by another 0.2% to the most since November at 43.5 tonnes worth $6.4 billion (£4.7bn, €5.5bn).

Net demand for silver, in contrast, was negative by weight last month for the first time since January, shrinking the total quantity owned by BullionVault users by 0.5% to a 3-month low of 1,128 tonnes worth $2.6bn (£1.9bn, €2.2bn).

Silver's balance of buyers over sellers fell at its fastest pace since April 2020, when the industrially-useful precious metal rebounded from sudden multi-year price lows following the Covid Crash in productive commodities. Last month's drop cut 8.0 points off the Silver Investor Index to 52.1, snapping a record 4-month run of readings above 60.0.

With hindsight, it's hard to overstate the fever which has now broken in precious metals investment. The past six months have brought more new investors to BullionVault than any full year in our two-decade history, including the Covid crisis of six years ago or the financial crisis peak of 2011.

Experience says that a repeat is unlikely any time soon. But the 2020s' perma-crisis shows no sign of letting up, and while the Iran War has so far seen oil strangle bullish bets on gold and silver, bad news has a habit of proving good for bullion prices and investment long term.