Gold News

Profit Taking in Gold Slows at Record-High Prices

Still fewest gold buyers in 4 years, 13 for silver...
RECORD-HIGH gold prices have seen private investors as a group sell more of the precious metal than they're buying yet again, writes Adrian Ash at world-leading marketplace BullionVault.
But unlike in silver – where the recent jump in prices spurred heavier selling among existing investors – the pace of profit taking in gold has slowed as financial and geopolitical risks continue to build ahead of New Year 2024.
Indeed, with gold prices setting new all-time records as cash in the bank offers the highest rate of interest since before the 2008 financial crash, the real surprise in physical bullion is that profit-taking hasn't been greater.
Gold selling remains marginal compared with the buy-and-hold approach adopted by the vast majority of private investors. That strategy, coupled with record-heavy central bank gold demand led by China, suggests that the rising floor beneath gold prices continues to strengthen as investors look ahead to 2024 and see a growing risk of recession, ongoing war in Ukraine if not worsening conflict in the Middle East, plus divisive elections in the US, India and the UK.
Even so, November saw the number of people buying gold on BullionVault drop 15.6% from October's rebound to hit a fresh 4-year low as the price rose $40 per Troy ounce to finish at a new month-end high of $2035.
The number of sellers fell harder than buyers however, down 36.8% from October's 7-month high. Together that pulled the Gold Investor Index – a unique measure of investor behaviour in the gold bullion market – up to 51.9.
Chart of the Gold Investor Index, last 5 years. Source: BullionVault
Any reading above 50.0 indicates more buyers and sellers. The Gold Investor Index set a decade low of 49.1 in June 2019 as the precious metal's price jumped at what was then the fastest pace in over 3 years, and it set a decade high of 65.9 as the Covid pandemic went global in March 2020.
Compared to that peak, the latest reading is clearly weak. More dramatically, last month's rise of just 1.1 points from October's 9-month low was the index's strongest increase since June, and the fourth strongest of the last 12 months.
A gold rush this ain't, in other words. And the SVB mini-crisis aside, it hasn't been all year. And while November saw investor selling in gold ease back despite the price rising further, this Monday's big price spike proved it's too early to say that profit-taking is close to exhausted.
Because BullionVault is open 24/7, unlike coin shops or stock market-listed gold ETF products, yesterday morning's 3.5% surge in gold prices at the start of Asian trade saw sellers jump to take advantage, outnumbering buyers and with the quantity sold outweighing demand by almost three-quarters.
That extended the pattern of the last 3 months – the longest such stretch since mid-2019 – with BullionVault users selling a quarter-tonne of gold more than they bought as a group across November.
But note: That was barely half the quantity of net gold selling in October, and while last month's liquidation took total client holdings down 2.1% from end-August's record high to the smallest in 20 months at 47.2 tonnes, it still saw the value of BullionVault users' gold rise 1.4% to a new record Dollar value of $3.1 billion.
Silver in contrast saw profit-taking accelerate in November as the Dollar price jumped by 7.8%, reaching the heaviest since April. BullionVault users sold 14.5 tonnes more than they bought as a group, cutting their total holdings by 1.1% to 1,229.1 tonnes, the smallest in 19 months and 3.0% below the record high of October 2022.
But here again, as in gold, the value of those silver holdings still grew, rising 6.6% across November to $988 million, the highest in 7 months.
Chart of the Silver Investor Index, last 5 years. Source: BullionVault
By number, however, silver's big price jump in November – putting it above $25 per Troy ounce at the end of the month for the first time since July 2021 – really whacked the balance of buyers and sellers.
The number of investors choosing to buy the precious metal fell 45.9% from October, sinking to the fewest since August 2010.
The number of silver sellers in contrast jumped by 57.3% to the most in 7 months. Together that pulled the Silver Investor Index down by 5.2 points, the steepest drop since October 2020, and it put the index at a new series low of 46.4.
Bottom line? Whether fast, high or both, rising prices for gold and silver continue to meet profit-taking rather than any kind of rush to buy. But that selling remains marginal, and across November it lagged the rise in prices, putting BullionVault users' total precious metals holdings at a new all-time high of $4.1 billion.
So it pays to take profit, short term. But it also keeps paying to buy and hold, too.

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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