Gold Investing H2 2023: Our Survey Said...
Wednesday, 7/26/2023 17:26
Latest precious metals' views and price forecasts...
ONE SWALLOW doesn't make a spring, or so they say,
writes Adrian Ash at BullionVault in analysis first shared with customers in the Weekly Update email.
But might this summer's doldrums in gold now be over, thanks to an upturn in money managers betting that the price will rise...?
As my colleague Atsuko Whitehouse here at BullionVault noted in
Monday's London Gold Market Report, speculative betting by hedge funds and other professional traders jumped last week.
Up by more than one-third from the week before, it reached the largest size – net of that same group's bearish bets – since the gold price set a new 'spot' market high at the start of May.
What's more, and compared to all Comex gold futures and options contracts now open, it also broke above 20% on the latest positioning data...
...the largest proportion since the gold price turned decisively bullish in late 2019.
Another straw in the wind comes from the ETF market.
Both the giant GLD
gold ETF and its No.2 competitor the IAU product saw net inflows of investor cash last week.
That snapped a run of outflows lasting for 5 weeks and 8 weeks respectively.
Early days, then, if these upturns do mark a turning point. Because together, the GLD and IAU combined are still well over 20% smaller than their all-time record size of summer 2020...
...with all gold-backed ETF trust funds worldwide still over 10% smaller from their 2020 peak.
Comex 'managed money' traders meantime hold a net bullish position today that is less than half the size of its all-time peak in September 2019...
...and as a proportion of all Comex gold contracts, it's below three-fifths its size at the all-time peak set in October 2009.
Room to run, in other words. If indeed the run has begun.
So what might drive gold and other precious metal prices higher or lower from here?
Many thanks to all BullionVault users who took part in our investor survey earlier this summer.
And if you didn't, well...I think you missed out.
Reviewing their own thinking, motives, outlook and expectations as the second half of 2023 got underway, the 1,442 people who chose to respond represent the largest pool of active precious metals investors to be surveyed like this.
And with their July 2023 responses now added to the twice-yearly results we have pulled since 2014, this survey has become one of the most consistent polls of private investors anywhere, never mind in that little corner of the financial markets occupied by physical bullion.
So what does our latest survey reveal?
First, 'monetary policy' comes above all other factors likely to drive the price of precious metals higher or lower from here until the end of 2023...
...named by 1-in-3 customers of the world's largest bullion market for private investors.
As you can see from our chart above, this extends the run of central-bank influence named in our survey over recent years.
Even in the depths of the first-wave Covid Crisis, in fact, the direction of interest rates and the size of QE bond-buying by central banks looked to have the clearest impact on our market. Or so our survey found private investors to think.
Notably, this factor has continued to trump 'inflation' as the key driver of precious metals prices too, at least according to investors choosing to include bullion in their portfolio.
So what's their primary reasons for doing that?
Now, you might think this marks some kind of disconnect.
Private investors name 'monetary policy' above other factors likely to influence gold and other precious metals' prices.
Yet interest rates being (still) so low has barely polled 5% across the last 3 years as the No.1 reason for owning physical bullion.
Way out ahead, the need to protect against inflation beat the desire to spread investment risk – named here as 'diversification' – in each of our summer surveys from 2020 to 2022.
But now, half-way through 2023, diversification has jumped in front...
...with anxiety over geopolitics fading as a motive, while a 'bull market' in the metals remains a rarely chosen reason for owning them, and the economic outlook edges higher (albeit below its mid-2020 reading).
Today's No.1 motive, diversification makes a telling choice. Because it chimes with how respondents to our survey are actually behaving as well.
You see, on average, those BullionVault users who took a few minutes to review and share their thinking say that they hold around one-fifth of their investable wealth in precious metals.
That might sound like a lot. It might horrify a
pension-fund manager, or an
independent financial advisor, or (heaven forbid!) a
financial markets regulator.
But among the pool of private investors using BullionVault to include precious metals in their portfolio, it means that almost 80% of their money is in other stuff. Stocks, bonds, real estate, commodities, foreign currency, private businesses, even crypto or Beanie Babies perhaps.
So diversification is, according to our latest survey, both the No.1 motive and by far the No.1 use for holding precious metals.
Put another way, instead of betting the farm on a bull run (and to repeat, belief in a 'bull market' polled barely 5% as the No.1 motive for owning precious metals this summer) it turns out that those investors holding physical bullion are using it as a counter-weight, as a hedge, as a form of insurance against the other stuff they own...
...and of which they own four times as much in total on average.
BullionVault users like you, in other words, are not so much gold or silver investors as investors who own gold or silver. That might seem a subtle difference, but it's an important distinction for financial journalists, analysts and even other investors who are now...maybe...thinking about whether to add precious to their portfolio too.
All this said, of course, no one buys an asset wanting or expecting it to lose value. BullionVault users certainly don't.
This table shows you where gold, silver, platinum and palladium prices stood on the day before we launched our mid-2023 survey, back at the end of June.
There's already been some movement since then, with gold and platinum rallying while silver briefly breaching our customers' average year-end forecast but palladium has gone nowhere so far.
Further ahead, private investors using BullionVault to spread their risk with physical precious metals now expect gold to set a fresh all-time high by New Year's Eve...
...while silver is forecast to finish 2023 with its highest year-end price since 2020, adding over $1 per ounce from the end of 2022, with both of the PGMs showing solid if less excitable rebounds as well.
Sure, "Bullion bulls bullish" doesn't sound like much of a headline, I know.
But given the depth of thought and analysis shown by investors like you in our recent survey, those forecasts look not only possible but sensible too. Especially if the upturn in professional investor interest in Comex bets and ETFs continues.
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