Gold Investing Rebounds as Stock Markets Crash
Tuesday, 8/06/2024 09:05
Monday reversed 1/2 of July's profit-taking in gold...
INVESTORS again took profits on gold at new record prices in July,
writes Adrian Ash at BullionVault, but demand has rebounded so far this week amid the sudden crash in global stock markets.
Investor selling on the world-leading marketplace last month outweighed gold buying by 152 kilograms worth over $11 million (£9m, €10m). That was the heaviest net liquidation since April and almost 5 times
the small net outflow of gold in June.
But Monday's stock-market slump to a sudden 3-month low on the MSCI World Index, plus a steep pullback in the price of gold to 1-week lows, saw net demand on BullionVault – which cares today for 44.9 tonnes of securely stored and insured bullion worth $3.5 billion (£2.7bn, €3.2bn) for more than 100,000 users worldwide – reverse half of July's outflow in just 24 hours.
With global stock markets previously setting new all-time highs throughout 2024, the combination of record-high gold prices plus high interest rates on cash worked to deter new gold demand while spurring profit-taking among existing investors.
Now interest rates are falling, the stock market has crumpled, and gold has retreated from its latest peaks. That clears the way for fresh inflows into the precious metal, most especially from investors wanting to add physical bullion as long-term insurance for their wider portfolio.
Ahead of this week's sudden plunge in world stock markets, the price of gold rose 4.1% in Dollar terms across July (2.1% in British Pounds, 2.7% in Euros) to set a new month-end price record in most major currencies.
Those gold price gains saw the number of investors using BullionVault to start or add to their holdings slip for the 3rd month running, down to the fewest since March. The number of sellers in contrast rebounded by 51.1% from June's 12-month low.
Together that pulled the Gold Investor Index – a unique measure of private sentiment in physical bullion built solely from actual investment behaviour – down 1.6 points to 52.3, the lowest since April.
Reading 50.0 when the number of net buyers equals the number of net sellers across the month, the Gold Investor Index hit a decade-high of 65.9
as online gold investment jumped when the Covid pandemic shut Western economies in March 2020. It set a series low of 47.5 this March
as gold investors sold when prices jumped at the fastest pace in 8 years to hit what were then all-time highs.
But while BullionVault users have continued to bank at least some of their gains on gold in 2024 so far, the precious metal's price has been rising faster than investors have been selling. That has increased the value of investor gold holdings overall despite its strong run of new record highs inviting people to take profit.
By weight, BullionVault users have now been net sellers of gold as a group for 11 months running, shrinking client holdings by 6.7% over that time. However, the value of those holdings has soared by 19.0% in Dollar terms (+15.0% in Sterling, +16.5% in Euros) as bullion prices have risen to new all-time highs.
Silver meantime sank on Monday to 3-month lows in spot-market trading. But the price of the more industrially useful precious metal had already lost 2.7% across July (-4.2% in GBP, -3.9% in EUR) to set its lowest end-month level since April.
That saw the number of people starting or adding to their securely-stored holdings of silver across the month rise 17.1% on BullionVault to the most since March 2023. While the number of net sellers rose faster, up 20.9% from June's 16-month low, that still edged the Silver Investor Index upwards by 0.4 points to 53.5, its highest reading since February last year and overtaking the Gold Investor Index for the first time since January.
By weight, silver investors were net buyers as a group for the 2nd month running in July, adding another 6 tonnes to take total holdings to the highest since April at 1,167 tonnes worth $1.0 billion (£834m, €989m).
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