Private gold and silver investing rebounds as prices
hit 6-year lows...
GOLD and silver investment amongst
private individuals is showing 'price sensitivity' akin to Asia's more
traditional buying patterns, writes Adrian Ash at BullionVault.
Ahead of this month's long-awaited decision on the US
Fed's long-delayed "lift off" from zero for Dollar interest rates,
November's slump in precious metals prices saw private investors in the West
take advantage of new 6-year discounts and reverse October's move towards
selling.
That's according to our latest Gold and Silver Investor
Indices. Both data series track the number of buyers over sellers across each
month on BullionVault – the world's largest physical gold and silver exchange
online, where more than 4,500 deals in vaulted bullion are matched every
week.
Both physical investment indices continue marking how
Western households – who account for 89% of BullionVault's 58,000 users
worldwide – continue behaving more like Asia's price-sensitive buyers, easing
back when prices rise, and showing their strongest increases when prices fall
hardest.
Built solely from investor trading on BullionVault (as
explained in this article for the LBMA's quarterly magazine), the Gold
Investor Index last month jumped from October's near half-decade low of 51.1
to read 53.8, its highest level since holding near 2-year highs in July.
Coming as gold's monthly average Dollar price fell 6.3% –
its fastest drop since the crash of spring 2013 – that was the fastest
percentage rise in the Gold Investor Index since February.
A reading of 50.0 would signal that the number of net
buyers across the month equalled the number of net sellers exactly. Some 89%
of BullionVault's 58,000 users live in Western Europe or North America.
The Silver Investor Index meantime leapt in November at
its fastest pace in 2.5 years, reaching 54.6 from October's new series low of
47.8 as the number of people adding silver during November rose by 51% to
match the last 12 months' average.
The number of people selling silver more than halved from
October's new 2015 peak, falling to the lowest level on BullionVault's data
since September 2010.
This response stands in stark contrast to money managers,
now selling and shorting precious metals at these new 6-year lows.
And alongside active private traders now selling spikes
and buying drops, longer-term investors as a group continue to build their
physical holdings at these lower prices.
BullionVault clients bought gold overall in November for
the tenth of the last 12 months, adding 0.2% to reach new record holdings
above 34.4 tonnes, all vaulted in the individual user's choice of New York,
London, Singapore, Toronto or Zurich (and all reconciled in public each day
with BullionVault's unique Daily Audit online).
Silver holdings rose for the eighth month running, growing
0.7% to a new record above 539 tonnes, 10.5% greater by weight from this time
last year.
Smart trading? Long-term accumulation of precious metals
is commonly associated with the massive Asian consumer markets, notably India
and now China, rather than with Western households. And it remains true that
gold and silver investing is far from universal amongst private individuals
in either North America or Western Europe.
But after the financial crisis of 2007-2012 answered the New
York Times' 1999 question "Who needs gold when you've got central bankers?"
with a resounding "Everyone!", the unique investment appeal of
physical gold and silver continues to spread.
Un-inflatable and un-bustable, physical bullion owned
outright gives you price risk, yes. But it removes that portion of your
savings from the risk of default – a true rarity amongst instantly tradable
assets which will prove a sure must-have for money managers as well as
private investors again in due course.
With chatter growing louder meantime throughout 2015 about
the US Fed marking an end to its zero-rate policy – potentially raising
bullion's opportunity cost over holding cash in the bank – private investors
using the world's largest gold and silver exchange online have increasingly
eased off when prices rise, and grown their personal holdings on price drops.
This pattern most clearly began with the price crash of
spring 2013, as the charts show above. Measuring the number of people growing
their gold holdings over the number of those selling, rebased as a proportion
of all gold owners at the start of the month, the Gold Investor Index jumped
to 58.6 – its highest level since the gold price peaked for Dollar and
Sterling savers in late 2011.
The difference in 2015, however, is that BullionVault
users overall have continued adding metal overall to their aggregate
holdings. Whereas the price crash of spring 2013, in contrast, saw net
liquidation – driven by selling from larger customers who'd bought during the
decade-long bull market – equal to 3.6% of what had been then-record total
client holdings just below 33 tonnes between April and end-June.
Looking ahead, many analysts and money managers expect a
US Fed rate rise from zero to dent gold and silver prices again, if only by
raising the Dollar's value against other currencies. But this month's
decision may present as much risk to the Fed's credibility as it does for
further lows in the gold price.
Delaying again after September's loss of nerve would hit
confidence badly. But lift-off will still leave US interest rates well below
even today's low rate of inflation, and beg the question of how long another
baby-step rise might take after seven years stuck at zero.
A growing number of private investors in the West are
tired of waiting already. Asia's deep gold and silver savings habit shows how
precious metals' investment appeal grows strongest when experience teaches
you not to rely on your currency holding value.
