Gold News

Gold and Silver Investing Rallies into New Year 2022

New bullion investing outweighs sales after profit-taking...
 
GOLD and SILVER INVESTING rallied into the New Year, with sentiment rising to 3-month highs on both the Gold Investor Index and the Silver Investor Index, working to reverse some of late-2021's profit-taking in precious metals, writes Adrian Ash at BullionVault.
 
After rising in November to spur the heaviest net gold selling since the eve of the Covid Crisis, gold prices fell to touch 2-month lows in December as the US Federal Reserve unveiled a faster timetable for ending new quantitative easing and then raising interest rates in 2022.
 
That price drop saw net demand on  BullionVault – the largest online and smartphone marketplace for physical precious metals, now caring for $3.8 billion (£2.8bn, €3.3bn, ¥434bn) of precious metals for almost 100,000 clients across 175 countries – steady and reverse 15 kilograms of November's 213kg net profit-taking.
 
Driving that stabilization, the number of investors choosing to sell gold on almost halved from November's count, falling by 45.2% with the steepest monthly retreat since the aftermath of the UK's Brexit referendum shock in summer 2016.
 
The number of gold buyers also declined however, slipping by 7.4% and so capping the Gold Investor Index at its highest since September with a reading of 54.2, up 1.4 points from November's 28-month low.
 
Chart of the Gold Investor Index, 3 years to Dec 2021. Source: BullionVault
 
The Gold Investor Index would read 50.0 if the number of net buyers across the month was exactly matched by the number of net sellers. Hitting a 9-year high of 65.9 as the Covid Crisis began in March 2020, it ended that year at 57.0.
 
So why the decline in 2021?
 
2020's record inflows to gold proved a hard act to follow for the precious metal, and it's a fact that investor sentiment, like bullion prices, has struggled despite the rise in inflation.
 
Private investors and money managers bought unprecedented quantities of gold as the Covid Crisis began, but while new inflows in 2021 lagged that surge, the vast bulk of those allocations remain in place, showing confidence in gold's role as long-term portfolio insurance.
 
As it is, gold prices rallied into the New Year following the US Fed's December statement and projections, closing 2021 at $1820 per ounce to show a loss of 3.8% from the previous 31st December.
 
Across 2021 as a whole however, gold's annual average price gained 1.6% in US Dollar terms, rising for a 6th year running.
 
The quantity of gold owned by BullionVault users expanded 3.6% by weight last year to start 2022 at 47.5 tonnes, all of it securely stored and insured in each client's choice of London, New York, Singapore, Toronto or most popular Zurich.
 
That's more than most of the world's national central banks hold in reserve and larger than the holdings backing all but 13 of the world's stock-market traded gold ETFs.
 
Chart of the Silver Investor Index, 3 years to Dec 2021. Source: BullionVault
 
A pop in silver prices had meantime spurred the first-ever net monthy selling of the industrially indispensable precious metals in November, but across December as a whole, silver bullion fell 7.1% in US Dollar terms, reaching its cheapest month-average price since July 2020 with its fastest drop since the Covid Crash of March 2020.
 
That plunge in prices saw the previous month's net selling of 2.7 tonnes reversed more than 3-fold, as number of people choosing to sell silver sink by 38.9% month-on-month, down to the fewest since December 2019.
 
The number of silver buyers in contrast rose by 6.8%, helping the Silver Investor Index rise 2.3 points to 54.5, up for a second month running from October's 27-month low and little changed from December 2020's reading of 54.2.
 
Across 2021 as a whole, and with 9.1 tonnes added in December, silver holdings expanded 10.7% by weight among BullionVault users, starting this New Year at a fresh all-time record of 1,251.3 tonnes.
 
But December saw a sharp drop in the number of people choosing to buy precious metals for the first time, down 59.3% from November to reach the lowest monthly total since July's 2-year low.
 
Across 2021 as a whole, the number of new precious-metal buyers fell 47.7% from 2020's annual record for first-time investors on BullionVault, with a slowdown in new Eurozone interest (-52.2%) outpacing the drop in the USA (-41.8%) and the UK (-42.4%).
 
Last year's fresh record highs in global stock markets also reduced the urgency of buying gold for diversification, and that confidence in risk assets may well continue to curb new inflows to precious metals as 2022 begins.
 
But this could present an opportunity for more long-term minded investors, because modern history shows that the best time to buy gold as portfolio insurance is when other people are ignoring it, making prices less elevated and offering greater upside when stock markets inevitably take a prolonged dive in due course.

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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