Gold Investing Drops on 9th in 9 New Year Price Gains
Tuesday, 2/04/2020 09:20
Profit-taking outweighs surge of new buying...
GOLD INVESTING demand turned negative in January, snapping 6 months of growth as a New Year surge in new buyers was outweighed by existing investors taking profits,
writes Adrian Ash at BullionVault.
That came as gold prices rose for the 9th January in a row in US Dollar terms, a remarkable pattern by any measure.
Gold's New Year 2020 price gain – driven by the US and Iran exchanging fire in Iraq while coronavirus broke out in China – met net liquidation of 0.6% on BullionVault, the world's largest precious-metals investment service online.
That shrank the total stock of gold held in each client's choice of professional vault by almost one-quarter of a tonne from
December's new all-time record, down to 39.0 tonnes.
Despite that outflow, January's rise in gold prices still took the value of BullionVault clients' gold holdings to a new all-time record, up 3.4% at $2.0 billion (£1.5bn, €1.8bn, ¥216bn).
January meantime marked the 3rd strongest month for new first-time users since Trump's election victory of November 2016, and the best January since New Year 2013.
This influx saw the number of people ending the month with more gold than they began rise 4.7% from December's figure, but the number of sellers leapt 88.7% to the most since June.
Together that took the Gold Investor Index – now tracking trading behaviour among the world's largest pool of private investors in physical, securely vaulted gold online
for over a decade – down from 55.6 to 53.5, a 6-month low.
The Gold Investor Index would read 50.0 if the number of net buyers across the month equalled the number of net sellers exactly. It set a near-10-year low of 49.1 last June as prices made their fastest 1-month rise since February 2016, up 5.9%.
January 2020 almost matched that price jump, with gold gaining 5.7% to set its highest monthly average since March 2013 – eve of the metal's worst quarterly price drop in 3 decades – at $1560 per ounce.
What of gold's remarkable New Year pattern?
While gold prices rose 9 times in the last 9 Januarys, the Gold Investor Index fell in all but one of them, month on month.
That's because, just like fund managers reviewing the year ahead and pushing up gold prices by buying a little financial insurance for their portfolios, self-directed private investors also often use the New Year to review their assets and spread risk.
But this means that while the gold market tends to enjoy a bump of new interest in January, existing investors also act to rebalance their portfolio – and this repeated New Year rise in prices rightly invites profit-taking in gold.
Last month's profit-taking on BullionVault was led by investors who first bought gold in 2019, when prices averaged almost $170 per ounce less than January 2020's level. Accounting for 10.9% of all gold owners on New Year's Day, they then accounted for 14.1% of net sellers.
Compared to the last 5 years' monthly average, January's number of first-time BullionVault users worldwide meantime rose 38.6%, but that was split between 121.6% growth in the Eurozone, a drop of 5.4% in the UK, and a drop of 29.9% in the United States.
Like gold, the price of investment silver rose again this January, gaining nearly 5.0% in US Dollar terms to reach the highest month-average since September at $17.97 per ounce.
The number of silver buyers across the month also rose, up 6.7% from December's 6-month low, but the number of the sellers jumped 36.6% to the most since September.
Together, that pulled the Silver Investor Index down to a 6-month low of 52.6 from December's 53.5 reading.
Again as with gold, silver holdings on BullionVault set a new record by value in January at $477m (£363m, €432, ¥52bn) but the grey metal also saw net demand rise by weight, up by more than 7 tonnes to reach another fresh all-time record at 829 tonnes.
Together with $28m of platinum, that saw us caring for very nearly $2.5bn of client bullion in total, a new record and 20.6% greater from the first of February last year.
Bottom line? While precious metals overall have seen the strongest start for first-time investors in 7 years, silver contines to find net demand but gold so far imn 2020 has met profit-taking by short-term traders.
The factors fuelling those trends look likely to continue, because political and economic uncertainty show no signs of retreating. That should keep gold prices volatile while attracting new longer-term investment cash into physical metal.
Email us
