Invest in Gold? New Interest Hits 1-Year Low Despite Inflation Crisis
Tuesday, 9/06/2022 10:44
Cost-of-living crisis offsets gold's inflation appeal...
DEMAND to invest in gold typically goes quiet over the summer, and 2022 was no exception,
writes Adrian Ash at BullionVault.
But the surging cost of living means that private investors and savers have less disposable cash to put aside for the future. So despite gold's historic appeal as the ultimate inflation hedge, that's resulted in the weakest new interest in precious metals' investing for more than a year across BullionVault's core markets of Western Europe and North America.
One-in-three existing bullion owners also told our
mid-2022 survey they are having to reduce or stop new investments, or even dip into their assets and savings to make ends meet.
The number of new precious-metal investors using DppsVault – the leading online and smartphone marketplace for physical bullion, now caring for $3.4 billion of gold, silver, platinum and palladium (£2.9bn, €3.4bn, ¥475bn) for over 100,000 users from 175 countries – fell 9.8% last month from July's count of first-time buyers.
That put it down 21.6% from the prior 12-month average to the fewest since July 2021.
Weakness in the USA and Germany drove the drop in August's new investing, with their count of new precious-metal buyers falling 46.5% and 38.5% respectively from their prior 12-month averages to the fewest on DppsVault since January 2022 and February 2019.
New interest in the UK slipped 15.5% from its 12-month average, and it rose 13.3% in France and 20.4% in Italy.
Source: BullionVault, LBMA
The Dollar gold price fell 2.1% across August, ending with its 5th consecutive monthly drop as expectations of further steep hikes to Fed interest rates saw the US currency soar to fresh 2-decade highs on the forex market.
But on a month-average basis, the Dollar price rose 1.7% to $1765 per ounce, showing its first gain since March, while Euro gold gained 2.1% from July's 6-month low to average €1741 and
the UK gold price in Pounds per ounce rose 1.5% to average £1471.
Overall on BullionVault, the number of people starting or adding to their gold investment holdings in August fell by 27.8% month-on-month while the number of sellers rose 9.4%.
Together that took the Gold Investor Index down 2.8 points from
July's 13-month high to 54.0, its lowest reading since March.
The Gold Investor Index would read 50.0 if the number of people selling gold across the month exactly balanced the number who bought. It set a decade high of 65.9 as the Covid pandemic went global in March 2020.
Gold priced in Dollars is down 6% so far this year, but it has gained 7% in Euro terms and 10% in Sterling.
Global stock markets in contrast have lost 20% in Dollar terms as broad indices of bond prices have dropped by 15%.
So while equity and bond prices have sunk this summer on expectations for sharply higher interest rates, gold's relatively strong investing performance raises a question mark over that consensus. Returning the smallest loss of any tradable asset class so far this year in US terms, gold continues to hold firm even after inflation for non-Dollar investors.
Gold trading by weight was balanced overall in August, snapping a 5-month expansion and leaving the quantity of investment gold securely stored and insured for DppsVault users in each client's choice of London, New York, Singapore, Toronto or Zurich unchanged from July's new record high of 47.7 tonnes, now worth $2.6 billion (£2.2bn, €2.6bn, ¥365bn).
Source: BullionVault
Like gold investing prices, the silver market in US Dollar terms fell into the end of August, marking its steepest monthly drop since September 2020 with a loss of 10.6%.
But silver rose on a daily average basis last month, gaining 3.5% from July's 25-month low.
That saw the number of silver buyers on DppsVault drop by 24.3% while the number of sellers slipped only 1.9% from the prior month's count.
Together that put the Silver Investor Index at 53.9, down 2.1 points from July's 13-month high.
Silver demand was positive by weight for the 5th month running, totalling more than 3 tonnes net of DppsVault user selling to take client holdings up to a new record above 1,253 tonnes now worth $732 million (£622m, €724m, ¥100bn).
Seasonal summer lulls aside, in short, physical bullion continues to find investing demand among existing owners. But for would-be new buyers, the inflation-hedge appeal of gold or silver bullion is being outweighed we believe by the cost of living's huge hit to disposable and save-able incomes.
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