Gold Investing Still Cautious at Record Prices
Tuesday, 9/03/2024 10:52
Number of new gold investors jumps at $2500...
WESTERN INVESTING sentiment towards gold bullion rose in August as prices hit fresh all-time highs,
writes Adrian Ash at world-leading marketplace BullionVault, now caring for $4.8 billion of precious metal for over 100,000 users from 175 countries.
But after falling to a record low this March as gold jumped through $2200, investor appetite for buying gold has remained cautious while prices have continued rising, hitting new record highs above $2500 last month.
Autumn 2024 offers plenty of reasons to start investing or build a position in gold, from today's rising recession risks to over-stretched stock markets and worsening geopolitical conflicts.
For now, however, the action in gold prices is really still confined to derivatives contracts, rather than investment flows to physical metal. Traders betting on the depth of US monetary easing drove August's new record highs, and there's scope for gold prices to pull back this month as the Fed's first rate cut finally arrives.
Tracking the number of people who buy securely-vaulted and insured gold over the number who sell it, the Gold Investor Index rose in August for the first time since May, adding half-a-point to 52.8.
Running since October 2009, BullionVault's index would read 50.0 if the number of buyers exactly matched the number of sellers. The
Gold Investor Index hit a decade high of 65.9 as the Covid pandemic went global in March 2020.
Sentiment then hit a series low 4 years later, dropping to 47.5 as prices jumped and more BullionVault users
chose to take profit than chose to buy the precious metal.
While Western investors remain cautious towards gold's bull market, the volume of profit-taking has slowed relative to the size of gold's price gains, and the number of first-time investors has jumped as the US Fed prepares to follow Canada, New Zealand, the Eurozone and the Bank of England in cutting interest rates from two-decade highs.
This month's US rate cut has been so long in coming, it's far from guaranteed to drive gold prices higher again. Longer-term however, weaker competition for investors' money from cash-in-the-bank will support new inflows to bullion, not least as fears that the Fed has left it too late to avoid recession run into November's fractious and divisive White House election.
Averaging $2467 per Troy ounce with a price rise of 3.0%, August marked gold's 6th new month-average record in US Dollar terms of 2024 so far, matching the year-to-date counts of 2011 and 1973 with the highest figure since 1972.
By weight, users of BullionVault sold 0.1 tonnes of gold more than they bought as a group, taking total holdings down 0.3% to the smallest in 4 years at 44.8 tonnes. By value however, those holdings rose 3.2% in US Dollar terms to a new record above $3.6 billion.
The number of new account openings at BullionVault meanwhile rose 45.5% from the prior 12-month average, taking the number of first-time precious metals buyers up to its highest August figure since the pandemic surge of 2020.
In contrast to gold, the month-average price of silver – which finds more than half its physical demand from industrial and technology uses – fell hard in August, down 4.1% in Dollar terms to the lowest since April at $28.52 per Troy ounce.
While that boosted investor demand by weight – adding almost 8 tonnes to take total holdings 0.6% higher to a 5-month high of 1,175 tonnes worth $1.1bn – the number of silver buyers fell almost twice as hard as the number of sellers, down 11.0% from July's 16-month high.
Together, that saw the Silver Investor Index reverse July's 0.4-point rise, falling back to 53.1 but holding positive after a record 3-month stretch of sub-50 readings between March and May.
Silver's dual role as an investment and industrial metal have seen prices caught between gold's bull market and China's economic slowdown. Investors as a group continue taking advantage of silver's underperformance to rebuild their physical holdings after the strong run of profit-taking.
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