Private Investing Jumps on Gold and Silver Price Drop

Gold bullion demand extends 5-year record run...

PRIVATE INVESTMENT in gold and silver seized on October's price falls, sending the balance of buyers over sellers to 3-month highs on BullionVault as net demand for gold bullion extended its strongest run in 5 years, writes Adrian Ash at the world-leading precious metals marketplace.

With gold now losing 30% from January's all-time highs and silver down by 60%, falling prices are attracting investor inflows.

Together with ongoing accumulation by central banks and bargain-hunting in Asia's giant consumer markets, this net demand from private investors in the West should help put a floor beneath prices. But it isn't bullish as yet, because gold and silver tend to rise when new money enters the market, and the pace of first-time investing continues to slow from the New Year's record levels.

Gold and silver last month lost 6.3% and 17.5% in US Dollar terms, hitting the lowest prices in 13 and 12 months respectively, down by almost one-third (30.7%) and three-fifths (59.8%) from the New Year's record highs.

Both the Gold and Silver Investor Indexes − tracking the number of buyers versus sellers each month since 2009 and 2012 respectively − gave their highest readings since June, when the two precious metals also made steep price drops.

By weight, BullionVault users were net buyers of gold and silver for the 3rd month in a row, adding 0.1 tonnes of gold and taking client holdings of the metal − all securely stored and insured in each customer's choice of London, New York, Singapore, Toronto or Zurich − to a 19-month high above 44.1 tonnes, worth $5.5 billion (£4.1bn, €5.0bn, ¥874bn).

Added to August and September's inflows, already marking a 5-year high for gold demand, that made the heaviest 3-month addition by weight since June-to-August 2021 at 0.6 tonnes, and the largest by Dollar value since August-to-October 2020 at $86 million.

Like March's drop in gold prices, October's losses came as AI and other tech stocks also fell hard. While this shows how gold rarely zigs the moment that equities zag, it will disappoint anyone expecting an immediate safe haven rather than a more long-term form of investment insurance.

The outcome of this week's US midterm elections has meantime seen precious metals prices rebound sharply, but it's unlikely to change the near-term headwinds for gold and silver from rising interest rates.

BullionVault finds 9-in-10 of its clients in Western Europe and North America. The number of people starting or adding to their physical gold holdings rose 8.0% in October to the most since June, while the number of sellers rose 9.1% from September's 21-month low.

Together, that raised the Gold Investor Index by 0.4 points to 56.3, a 4-month high. It also raised the index's 12-month average to 56.5, the highest in 5 years.

Any reading above 50.0 signals that buyers outnumbered sellers. The Gold Investor Index's monthly series hit a post-pandemic high of 60.7 this March as prices tumbled when oil prices jumped, pushing up interest-rate expectations, following the start of the US-Iran war.

The Silver Investor Index also hit a 4-month high in October, rising 2.5 points to 55.0 as the number of buyers leapt 36.9% from September's 13-month low and the number of sellers was almost unchanged (+0.4%).

By weight, BullionVault users bought almost 1 tonne of silver more than they sold as a group, taking their total holdings to the largest in 10 months at 1,140 tonnes, now worth $1.8bn (£1.3bn, €1.6bn, ¥288bn).

The number of first-time investors slipped 3.8% from September's count of new BullionVault users, and came 59.3% beneath the past 12 months' average, albeit 11.2% above July's 18-month low.