Gold News

Gold Price Sub-$2300 as Western Investing Outflows Add 7% to Global Supply

GOLD BULLION fell for the 8th time in 10 sessions on Tuesday, losing over 1.5% to drop through $2300 per Troy ounce as new data confirmed the scale of Western investment outflows at this spring's fresh all-time price highs for the precious metal.
Gold Demand Trends' data from the mining industry's World Gold Council says households in No.1 consumer nation China grew their overall jewelry, coin and small bar purchases 12.7% by weight in January-to-March compared to the first quarter of last year, in line with last week's figures from the China Gold Association.
"[But] in Western markets," says today's report, "continued buying interest was met with a surge in profit-taking."
Net demand for gold coins and small bullion bars sank more than 40% from Q1 last year in the USA, Germany, Switzerland, UK and Canada, and it sank to zero in Austria while running negative for the second quarter running in France.
Added to continued outflows from gold-backed ETF trust fund products, that saw gold investment selling in North America and Western Europe total more than 84 tonnes between January and March – adding an extra 6.8% to global gold mining and scrap recycling flows on the WGC's new data, compiled by specialist analysts Metals Focus.
Chart of gold investing demand in US + Canada and Western Europe. Source: BullionVault via World Gold Council
Peaking at $2431 per Troy ounce in London's bullion market 2 weeks ago, the price of gold today fell to a 1-week low of $2299, down 5.3% from that record high gold price above $2400 and only $8 above last Tuesday's 3-week low.
The UK gold price in Pounds per ounce fell to new 3-week lows beneath £1835 while the Euro gold price dropped through €2150.
Western stock markets also fell Tuesday as longer-term borrowing costs rose in the bond market following a surprise jump in US wage data.
Instead of rising 1.0% from the end of 2023 as forecast by analysts, the US employment cost index rose by 1.2% before seasonal adjustment, its fastest pace since mid-2022's series highs.
Ahead of tomorrow's US Federal Reserve policy statement – expected to see no change from today's 2-decade high of 5.33% in Dollar interest rates – that news saw Western government bonds fall, driving yields higher, while betting on the Fed's end-2024 rate moved up to a consensus forecast of 5.07% per annum.
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Rising bond yields and interest-rate expectations across Western investment markets in Q1 "[were] met with a jump in [gold] liquidations as investors saw continued record high gold prices as too good to pass up," says the WGC today, "particularly in a quarter without the regional bank failures that lit a fire under demand in Q1 of last year."
Looking at typically costly gold-coin retail prices – and in contrast to China's strong private-sector demand at Q1's then-record high prices – "Falling premiums reflected loosening dynamics in the [Western] market," the WGC goes on, "[as] healthy levels of fresh buying were countered by a wave of selling back as the gold price took off."
Giant US gold ETFs the GLD and IAU saw no change in size overnight, remaining close to the smallest combined size since spring 2020.
Across the 10 years ending 2022, and on a rolling 4-quarter basis, the sum total of North American and Western European gold ETF, coin and small-bar demand typically showed a strongly positive correlation with the quarterly average gold price, giving a median r-coefficient of 0.796.
That figure would read 1.000 if gold prices and Western investing demand moved in lockstep together, or -1.000 if they moved exactly opposite.
The number sank to minus 0.658 in Q1 2024, showing a massive divergence between the direction of gold prices and the level of Western demand to invest.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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