Gold News

Private Gold Trading Hits 8-Month High

Buyers outnumber sellers on Gold Investor Index. But they don't outweigh them as prices fall...
 
GOLD TRADING by users of BullionVault last month hit the highest level since March, writes Adrian Ash, head of research.
 
Those people represent the largest single pool of physical gold investors online. So what they choose to do – buy, hold or sell, all at the lowest costs – gives a clear signal of how the wider investing public sees gold right now.
 
And in November 2014, our data show, the number of people starting or adding to their gold holdings was greater than those cutting or quitting. That's been true for the last 57 months running. But the quantity bought, however, was outweighed by sellers for the first time since April.
BullionVault's Gold Investor Index, 3 years to November 2014
 
November's fresh price weakness saw the heaviest gold trading since March on BullionVault's peer-to-peer exchange, with a growing number of people buying gold to build financial insurance at lower cost.
 
That rise saw our Gold Investor Index – which measures the balance of net buyers over net sellers across the month – rise to 52.1 last month from the 51.9 level seen in October. 
 
A reading of 50.0 would signal the number of net buyers matched net sellers exactly. Recording a series peak of 71.1 in September 2011, the Gold Investor Index hit a 4.5-year low at 51.2 this June.
 
Total client holdings however fell slightly by weight, down one-fifth of a tonne from the record 33.2 tonnes held in September and October for the first drop in 7 months. Because gold selling by a handful of larger, long-standing clients outweighed the quantity bought by newer users.
 
That net selling by weight was, perhaps, less surprising than the rise in broader sentiment given November's new lows in the gold price. Those lows in turn were driven by the collapse in oil prices and the new record highs in US stock markets.
 
But while the exit of hot-money funds and traders from the derivatives gold market means lower prices for physical traders, that in fact creates an opportunity for private investors to build a position in gold at lower cost.
 
Savers in the Eurozone in particular don't share the broader financial markets' complacency. Impending QE from the European Central Bank saw more Eurozone clients buy gold on BullionVault in November than any month since April 2013 – the gold price crash which unleashed a wave of gold trading by investors new to the market.
 
If you have been thinking about buying gold as financial insurance – a long-term counterweight to the credit, equity and liquidity risks in your other investments – then recent prices offer a compelling discount from the crisis peaks of 2011-2012.

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

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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