Western Investors Bank Record Profits on Gold
Tuesday, 4/02/2024 09:30
New record prices as China buys gold, Western investors sell...
WESTERN INVESTORS just banked record profits from gold, selling more than twice the quantity that they bought as a group in March using world-leading marketplace BullionVault, as speculative betting by hedge funds, plus China's relentless central-bank demand, drove the price of gold up to new record highs in all major currencies.
But record-heavy selling by a record number of customers still left client holdings at BullionVault worth fresh record high above $3.2 billion (£2.5bn, €3.0bn).
"Previous peaks in the number of people selling gold also came as bullion prices jumped," says BullionVault director of research Adrian Ash. "But they all coincided with moments of acute political or financial stress, spurring stronger investor demand.
"In contrast, gold's new all-time highs have come without any external trigger. That speaks to the underlying strength of this uptrend, with relentless demand for physical bullion from emerging-market nations led by China more than offsetting the record-heavy profit taking by Western investors."
The price of gold jumped by 8.1% last month – its fastest gain in a year – to finish at a new record of $2214 per Troy ounce (+8.5% to £1752, +8.7% to €2050) after setting a fresh all-time high on 9 of the global wholesale market's 20 trading days across March.
In response, the number of private investors buying gold on BullionVault – almost 9-in-10 of whose users live in Western Europe or North America – slipped 3.4% to the fewest since December.
The number of sellers in contrast rose 95.1% to beat the number of sellers in March 2023 (the 'mini crisis' in US regional banking), August 2011 (US debt downgrade, Euro debt crisis, English riots), March 2022 (Russia's all-out invasion of Ukraine) and June 2016 (the UK's Brexit referendum shock).
Together, that took the Gold Investor Index – a unique measure of trading decisions among the world's largest single pool of private investors in physical bullion – down to a new series low of 47.5, down 4.0 points from February with its steepest drop since July 2016.
Tracking gold investor actions since October 2009, the index would read 50.0 if the number of buyers exactly equalled the number of sellers across the month. It reached 65.9 as the Covid Crisis took hold in March 2020, and it set a series high of 71.7 when gold prices hit their global-financial-crisis peak in September 2011.
The Gold Investor Index has recorded more gold sellers than buyers only twice before (48.8 in Feb 2010, 49.1 in June 2019).
By weight, total demand to buy gold on BullionVault – now open 24/7 since April 2005 – rose 4.5% in March from the previous 12-month average to reach 0.7 tonnes. But selling more than doubled, rising 100.3% to total more than 1.6 tonnes.
Net-net, that saw private investors liquidate 992 kilograms of gold – 28.0% more than the previous record outflow of June 2019 – worth a record $68.8 million (£54.1m, €63.3m).
That took investor gold holdings at BullionVault down to 45.5 tonnes, the smallest since 2020 and down by 5.5% from the record high holdings of last August. By value, however, those investor holdings have risen 7.7% in Dollar terms over the past 7 months to finish March at a record $3.2 billion (+8.1% in GBP to £2.5bn, +8.3% in Euros to €3.0bn).
"With central banks led by China paying record-high prices for gold, Western investors are increasingly happy to sell, taking profit at the highest prices in history. But this is rebalancing, not a rush for the exits, because their remaining holdings have also risen in value to new record highs, and gold's appeal as a form of investment insurance is undimmed, ready for whatever political or financial crises 2024's highly uncertain outlook could bring."
Like gold, silver jumped in price last month, rising 9.8% to its highest monthly close in four at $24.54 per Troy ounce (+10.2% to £19.46, +10.3% to 22.76).
That saw the number of silver sellers on BullionVault double in March from the month before, up 108.7% to the most since February 2021, when the #silversqueeze ramp on social media sent silver prices towards an 8-year high 1 cent shy of $30.
Back then, the number of silver buyers across the month was 4.7 times larger than March 2024, putting the Silver Investor Index at 61.0, its 8th highest reading since the series began at New Year 2012. But last month the index sank to a new all-time low, down 5.1 points to 45.0 and signalling more sellers than buyers for the 4th time in the past 12 months.
By weight, silver selling outran buying by a record 29.8 tonnes, taking the total stock of silver bullion still held down 2.4% to 1,199.8 tonnes, the lowest since April 2021 and 5.3% smaller from the record high of October 2022.
By value, in contrast, BullionVault users' silver holdings have grown by 11.8% to $878 million (+11.0% in GBP to £750m, +11.8% in Euros to €878m).
"Gold's sudden jump to new all-time highs leaves the price looking stretched short term," says Ash, "and the market may struggle to absorb the huge quantity of bullion coming back from Western investors, especially as Asia's big consumer nations head towards the seasonal summer lull in household demand.
"While Asia's big gold buying markets can be very price-sensitive short term, consumers have repeatedly grown accustomed to higher gold prices over time. Short of peace and trust breaking out between the West and 'the rest', demand from emerging-market central banks looks set to continue, with the People's Bank of China seemingly happy to buy gold at any price."
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