Western Gold Investing Rebounds from Record Low
Tuesday, 5/07/2024 13:42
New record high gold prices still spur profit-taking...
GOLD INVESTING among Western households rebounded from a record low in April, jumping at the fastest pace in almost 4 years on the Gold Investor Index as gold prices leapt to extend 2024's run of fresh all-time highs,
writes Adrian Ash at BullionVault.
The number of first-time investors in gold also rebounded, helping offset further profit-taking among existing holders and cutting the pace of net selling by more than two-thirds from the record outflow of March.
But while this spring's rebound in Western gold bullion investing is dramatic, our data show that it comes off a very low base. It also hasn't reversed the relentless selling out of
gold-backed ETF trust funds or stemmed
the West's ongoing liquidation of gold coins and small bars.
So with prices setting yet more all-time gold highs in April – and now holding firm at what were new records only a month ago – that shows just how strong gold demand is running among Asian investors and savers, most especially in
China's private-sector gold demand.
Emerging-market central banks also continue accumulating gold bullion as the wars in Ukraine and Gaza worsen geopolitical and financial tensions between the major powers.
Straw in the wind, perhaps. But are Western investors finally about to join them?
The Gold Investor Index tracks the number of people buying gold against the number of net sellers on BullionVault, the world-leading precious metals marketplace for private investors.
Now caring for a record $4.4 billion of securely vaulted and insured gold, silver, platinum and palladium in total (£3.5bn, €4.1bn, JPY699bn) for over 100,000 users from 175 countries worldwide, the West London fintech finds 9-in-10 of its client-base living in Western Europe or North America.
BullionVault's gold index last month reversed March's drop to a new series low of 47.5, rebounding by 4.1 points – the steepest jump since gold prices first broke above $2000 per Troy ounce in August 2020 – to read 51.6 on our unique data series.
Averaging 54.4 over the past decade, the Gold Investor Index reads 50.0 if the number of net buyers equals the number of net sellers. It set a series record of 71.7 in September 2011, height of the global financial crisis, and peaked again at 65.9 as Covid lockdowns swept the world in March 2020.
Led by new all-time highs in Shanghai gold prices, the London bullion market set
a record run of 8 new daily gold price records in a row at the start of April, with the precious metal then peaking above $2400 per Troy ounce.
On a month-average basis, gold priced in Dollars rose to a new record of $2335, up 8.2% from March and 15.4% higher than February. That was the strongest 2-month rise since February 2009, when Western stock markets hit 12-year lows as central banks led by the US Fed began QE and zero interest rates following the collapse of Lehman Brothers.
So what began this New Year as a stealth rally in gold has finally grabbed Western investors' attention. Indeed, this remarkable jump in gold prices echoes the precious metal's bull runs of the 1970s and 2000s. And while the heat has clearly come out of
Shanghai and Comex derivatives gold betting for now, the underlying uptrend in gold remains in place. So do the factors driving it, with China experiencing its own 'Lehman's moment' of investment and economic stress while tensions between the rich West and the rest-of-the-world continue to worsen.
Take note: The Western world's leading gold investment marketplace flipped back to a positive balance of gold buyers over sellers last month. But investor selling continued to outweigh buying in April.
Net liquidation of 0.6% took DppsVault client holdings down to the lowest since September 2020 – peak of the Covid Crisis gold-price surge – at 45.2 tonnes.
The rate of net selling slowed hard however, dropping by 70.9% compared to March's record heavy outflow of nearly 1.0 tonne. That let the rising price of gold take the value of DppsVault client gold holdings up by 3.5% at month-end to a second new record in a row at $3.3 billion (+4.4% to £2.6bn, +4.3% to €3.1bn, +7.8% to JPY529bn).
Driving last month's rebound in the Gold Investor Index, the number of people choosing to invest in gold for the first time on DppsVault also leapt in April, jumping by 65.0% from March's count and rising 86.7% from the prior 12-month average, which had fallen to a 5-year low.
Last month's jump in new users – the sharpest jump since April 2020, when the Covid crisis unleashed record-heavy gold demand by a record number of Western investors – was led by a 95.9% rise in the UK versus its 12-month average and a rise of 88.1% in France. New interest in the USA was more muted, rising only 39.5%, while Germany rallied just 24.6%.
Like gold, the price of silver leapt for a second month running in April, rising by 12.8% from March in US Dollar terms and gaining 21.6% from February – its fastest 2-month rise since September 2020, peak of the Covid crisis' surge in precious metals prices. – to beat May 2021's monthly average at $27.58 per Troy ounce, the highest since March 2013.
But unlike gold, the Silver Investor Index bounced only weakly from March's new series low of 45.0 to reach 47.3. That would have been a record series low prior to the run starting last November.
Silver holdings by weight meantime saw a second new record outflow in a row, with investors using DppsVault liquidating 32 tonnes of the more industrially-useful precious metal net of client demand. But by value, those holdings also set their 2nd new all-time high in a row, rising above $1 billion for the first time since we added securely vaulted and insured silver to BullionVault's existing gold offering at New Year 2010.
All-in-all, last month's rebound in new precious metal investors came off a very low base, and it needed a record run of new record prices to gain attention. The rebound in the Gold Investor Index also came off a record low, and – to date – silver has seen only further profit-taking and net liquidation as prices leap to decade highs.
Straws in the wind, in short. For now, the price action is being driven outside the West. And existing gold and silver investment owners in the West remain happy, for now, to bank the resulting gains.
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