Gold Investing Sinks to Bear-Market Lows as Price Hits New Highs
Tuesday, 1/02/2024 11:43
Central banks, in contrast, invest in gold at 6-decade record...
2024 BEGINS with record-high gold prices meeting the weakest level of private investing since the precious metal's deep bear market of a decade ago,
writes Adrian Ash at BullionVault, while silver sentiment just fell to the lowest on record.
More on silver below. But for gold, the split between private investment and central banks couldn't be starker. Because while official-sector reserve managers are
buying gold like it's the lynchpin of the global monetary system once more, private capital is selling or shunning the chance to invest in the precious metal as though it's stuck in a bear market even as it makes a record bull run.
Spiking to a new spot market record of $2143 per Troy ounce at the start of December,
the price of gold ended 2023 with a new year-end, quarter-end, month-end and weekend record high in terms of the US currency.
Gold bullion rose 13.7% from the previous New Year's Eve to finish at $2062 per Troy ounce after the Federal Reserve confirmed that it plans to cut Dollar interest rates this year.
In response, fewer private individuals chose to buy gold in December than any month since May 2019, down 12.0% from November's count. The number of sellers in contrast rose 3.5% to the most since October's 7-month high.
Together, that pushed down the Gold Investor Index – a unique measure of private investing activity in physical bullion – by half a point to 51.4, the
lowest December reading since 2014, when
gold prices extended the previous year's steep crash following the precious metal's then-record peaks of the global financial crisis.
Last month's reading also capped the annual average of the
Gold Investor Index at the lowest in 9 years, down 1.6 points from 2022 at 53.0. The index would read 50.0 if the number of buyers exactly matched the number of sellers across the month. Its monthly reading hit a decade peak of 65.9 as
the Covid pandemic went global in March 2020.
High interest rates and record-high gold prices are deterring new buyers from choosing to invest in gold while also inviting continued profit-taking among existing investors. In contrast, central banks led by China continue buying gold regardless of price, hoarding at the fastest pace since the early 1960s as they seek to de-dollarize their foreign reserves to spread risk and reduce the risk of exposure to US sanctions.
That highlights the
worsening mistrust and tension between major powers ahead of 2024's US election. Yet despite last year's dreadful geopolitical news, gold lacked urgency for private investors as global stock markets almost reversed 2022's crash.
With gold's uptrend forecast to continue in 2024, private-sector gold bullion demand is likely to rally as the US Fed leads Europe in starting to cut interest rates. But a more marked rebound will probably need fresh urgency from a geopolitics, economic or financial shock.
By weight, gold's record-high finish to 2023 saw BullionVault users sell more of the 'safe haven' precious metal than they bought as a group for the 4th month running, shrinking their total holdings – securely vaulted and insured in each client's choice of London, New York, Singapore, Toronto or Zurich – below 47 tonnes for the first time since March 2022.
But while BullionVault user holdings are now 2.6% lighter than August 2023's record and 1.2 tonnes smaller than at New Year 2023 – a record-heavy annual outflow – they rose in value by 11.0% in Dollar terms across last year to reach a new record at end-December above $3.1 billion (+5.1% in Sterling to £2.4bn, +7.0% in Euros to €2.8bn, +19.2% in Japanese Yen to ¥441bn).
Silver's month-average price rose in December, up 2.5% in Dollar terms to reach $24 for the first time since July.
But the precious metal fell sharply into month-end, losing 4.9% in Dollar terms from the end of November's finish at $25, the highest since mid-2021. That saw the number of silver buyers rebound across December by 43.6% from November's 13-year low, while the number of sellers sank by 41.3% from what was a 7-month high.
Together that pulled the Silver Investor Index up 4.4 points from November's new series low to read 50.8 last month. It also held the index's annual average at 50.8 as well, down 1.7 points from 2022's annual average at a record-low on our 12-year series.
Again, high interest rates on cash make un-yielding bullion less attractive. But outflows from silver bullion are heavier and steadier than from gold, and the excitement of January 2021 – when
the #silversqueeze meme took hold and very briefly spiked the price to $30 per ounce – now feels a very long time ago for the productively useful precious metal.
By weight, investors were net liquidators of silver for the 7th month of 2023 in December, selling 14 tonnes more than they bought as a group on BullionVault and shrinking their total holdings to 1,214 tonnes.
The smallest silver holding in 31 months and 4.2% below October 2022's record level, it entered New Year worth $928 million (£728m, €838m, ¥131bn), down 3.6% in Dollar value from 12 months before.
Most usually, and whether in bull or bear markets, silver prices tend to track gold but extend its moves. Last year in contrast, gloomy economic forecasts over-rode
new record-heavy industrial demand for silver, denting speculation even as its uses grew yet again, led by solar energy technologies. More crucially amid this lull in demand to invest, silver also continues to lack that central-bank demand now doing so much to support and boost gold investing prices as 2024 begins.
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