Gold News

Record Gold and Silver Trading at World No.1 on Massive Price Swings

Nearly $50m traded in 24 hours at BullionVault...
 
The PRICE of GOLD just suffered its steepest 1-day drop since the precious metal's historic price crash of April 2013, writes Adrian Ash at No.1 precious-metals trading platform BullionVault.
 
Losing 6.6% from Tuesday morning, gold bottomed at $1865 per ounce overnight – down $210 from last Thursday's all-time high, the 6th new record hit in just 2 weeks.
 
Chart of gold priced in US Dollars, last 20 years. Source: BullionVault
 
Silver prices meantime fell by as much as one-fifth overnight, before rallying to cut its 1-day drop to 7.8%, the steepest drop for the more industrial precious metal since mid-March's historic crash when the Covid pandemic shut economic activity worldwide and crude oil prices briefly went negative, 'cos you couldn't even give the stuff away, such was the deflationary shock of closing everything everywhere to try and stem the spread of the novel Coronavirus.
 
This massive volatility has spurred record gold and silver trading volumes on BullionVault, the precious metals marketplace for private investors. Tuesday 11 August beat 24 June 2016 – the day of the shock Brexit result in the UK's EU referendum – by 21.9% at £38.1m by value...
 
...some $49.7m (in US Dollars) or around €41.2m...
 
...all of it physically settled inside specialist vaults for full payment only. No leverage, no shorting, no credit. Just physical gold and silver (and platinum) with 24/7 trading live online and by mobile smartphone.
 
Chart of silver priced in US Dollars, last 3 months. Source: BullionVault
 
Compared to the prior 365-day average, customer selling jumped 5-fold by weight in gold on Tuesday (+508.5%), leapt over 8 times in silver (+861.0%) and rose 3 times in platinum (+317.7%).
 
But demand also jumped (+448.3% in gold, +663.0% in silver, +185.1% in platinum) and so users were still buyers of all 3 precious metals overall, acquiring £3.4m of gold as a group ($4.4m, €3.7m) plus £1.2m of silver ($1.6m, €1.3m) and nearly £70,000 of platinum ($91,000 or €75,000) net of selling.
 
What next?
 
Any long-term bull market is prone to speculative spikes, and gold's jump above and back below $2000 doesn't change the macro factors driving what is now a 2-year uptrend.
 
For comparison, gold spiked by one-third in 8 weeks in March-to-May 2006, only to give it all back over the following month. Gold didn't beat that top at $730 per ounce for another 16 months, not until the global credit crunch claimed its first high-profile scalp with the collapse and government bail-out of UK mortgage lender Northern Rock.
 
But while those buying the very peak of spring 2006's spike then had more than a few sleepless nights, and had to wait a little while longer to get back to break-even, the underlying uptrend continued meantime. Five years later, that bull market in gold peaked over 160% higher again in September 2011.
 
So why this summer 2020 spike and retreat in gold and silver prices? What's driving people to put money into physical precious metals, trading gold and silver amid the worst economic slump in modern history?
 
BullionVault polled readers of its Weekly Update email to clients between 22 June and 7 July 2020, receiving 1,328 full responses on precious-metals investing.
 
Our users typically hold 5-20% of their self-managed assets in precious metals. Their No.1 motivation is fear of currency debasement and inflation, with the aim of spreading risk by diversifying their other investments a close second. More than 1-in-3 believe monetary policy will now have the single greatest impact on the underlying direction in gold, with 1-in-5 naming the size of government deficits, jumping ahead of geopolitics for the first time in our twice-annual survey's 5-year history.
 
No.1 driver of gold prices according to BullionVault's user surveys, 2014-2020
 
People invest in gold because they're worried about the value of other assets, such as stocks and shares and indeed money itself. With central banks now supporting record government deficit spending quite openly, meaning their independence is gone, investors in precious metals believe this is going to be one of the largest drivers of the gold price this year.
 
But while gold is often (and rightly) thought of as an inflation hedge – and that's the long-term appeal for most investors holding precious metals today – shorter-term today, as the world economy tries to re-open after the Covid Shutdown, the risk of mass bankruptcies and debt defaults present the greatest immediate to global financial stability.
 
Or so says the world's largest pool of private gold and silver traders. Who better to ask what's driving this market? And that pool continues to grow.
 
New client acquisition hit a fresh record pace earlier in 2020, beating the 3-month record of gold's prior mid-2011 price peak between March and May as the Covid Catastrophe struck savers and investors living in our core markets of Western Europe and North America.
 
Between them, the total pool of BullionVault users now own a record $3.6 billion (£2.7bn, €3.0bn) of physical gold, silver and platinum between them...
 
...all of it stored securely at very low cost in each client's choice of 5 global locations, Zurich most popular among them.
 
Yet so far this month however – and despite new client acquisition already beating 95 of the last 120 months, just 11 days in – August 2020 is seeing a much smaller surge in new interest than the last 'big top' in bullion prices did in 2011.
 
Maybe that doesn't mean much. Maybe the hot money piling into gold (or rather, betting on it) through futures and options is where the real frenzy lies.
 
Or maybe the lack of mass-media coverage...plus the steadily rising trend in people searching Google to 'buy gold' while not yet acting...plus the relentless attack on the value of money itself which governments and central banks have promised everywhere as the only way of reducing the unprecendented debts built in the name of fighting the Covid Catastrophe....now signal that the uptrend in precious metals is a long way from peaking.
 
Maybe.

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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