Gold News

'No Crisis' Gold Price Spike Sinks Investor Buying, Profit-Taking Leaps

Gold trading ratio of buyers-to-sellers hits 43-month low...
WHOEVER was buying gold to push up and spike bullion prices last month, they weren't trading it on BullionVault, writes Adrian Ash at the world's largest marketplace for private investment in physical precious metals.
Nor did they choose to trade gold through bullion-backed ETF trust funds. Nor – by all accounts – through coin or small bars.
Instead, gold's steepest price rise since its peak in the first-wave Covid crisis saw private investors sell and take profit. And the high price of gold is also deterring new decisions to invest, with last month marking the weakest January for first-time precious metal buyers in 13 years.
Net of customer buying, BullionVault users sold one-third of a tonne of gold last month, reversing the previous 3 months of net demand as the metal's price in US Dollar terms rose 5.7% on its monthly average. That was the strongest rise since the precious metal touched its current all-time record of $2075 per ounce in August 2020.
For UK investors gold in January jumped 5.5% in British Pounds, setting a new all-time monthly high, and it gained 3.8% in Euros, also the fastest such rise in 10 months.
But how?
Gold's strong gain in New Year 2023 came with no new shock or crisis driving investors to buy physical bullion. That contrasts with the approach of Covid in 2020 or Russia's invasion of Ukraine last winter, and it left speculation in gold derivatives to get over-excited, both by talk of a mystery buyer among central banks and by hopes that the US Fed will pivot from raising rates to cutting them sooner than later.
Chart of the Gold Investor Index, last 3 years. Source: BullionVault
In physical gold, in contrast, investing behaviour couldn't have been more different.
The number of people choosing to sell gold last month on BullionVault – now caring for $3.9 billion of precious metals (£3.2bn, €3.6bn, ¥521bn) for over 100,000 users from 175 countries – jumped 81.4% from December's figure, the steepest jump since prices spiked ahead of the Covid Crisis in January 2020. It took the number of gold sellers up to the most since March 2022, when Russia's invasion of Ukraine drove the Dollar gold price up within 1.0% of its record peak of summer 2020.
The number of buyers, in contrast, fell for the 4th month running, slipping 4.7% to the fewest since July 2019, when fears of a US recession led the Federal Reserve to start cutting interest rates from what was then an 11-year high of 2.50%.
Together that pulled the Gold Investor Index down 2.7 points to 50.6, the lowest reading since June 2019
The index set a decade-high of 65.9 as the Covid pandemic went global in March 2020. A reading below 50.0 would indicate more buyers than sellers across the month.
Lacking a more urgent driver for physical investment, gold's current pullback may have to run a bit deeper from here to entice new inflows. Like the profit-taking on BullionVault, demand for gold coins and small bars has weakened sharply at these prices, and gold ETFs continue to see net liquidation.
With BullionVault users selling 0.3 tonnes of gold more than they bought as a group in January, that shrank the total quantity of gold –  all securely vaulted and insured for the London fintech's global customer-base in each user's choice of London, New York, Singapore, Toronto or (most popular) Zurich – by 0.7% from December's new all-time high, down to 47.8 tonnes worth $2.9 billion (£2.4bn, €2.7bn, ¥389bn).
Stock-market listed gold ETF trust funds meanwhile shrank another 0.5% in January according to data compiled by the mining industry's World Gold Council, seeing the 9th consecutive monthly outflow and taking the sector's total holdings to the lowest in almost 3 years.
Data from the coin and small-bar industry is less freely available, but the US Mint reports selling 10% less gold and 21% less silver in the form of American Eagle coins last month versus January 2022, while some retailers in Europe and North America have put normally popular products 'on sale'.
Chart of the Silver Investor Index, last 3 years. Source: BullionVault
Silver also rose in price last month, up 2.2% on its US Dollar average but rising only 0.4% in Euros –  also to the highest in 9 months – while the price of silver in UK Pounds added 1.9% to a 20-month high.
Silver's muted performance compared to gold saw the number of silver buyers on BullionVault rise 42.8% from December's 43-month low while the number of sellers fell 28.1% from December's 9-month high.
Together that pulled the Silver Investor Index up to 51.0, rising 3.5 points from the prior month's new series low.
By weight however, BullionVault users were sellers of silver overall for the third month running, liquidating another 0.8% of their holdings to cut the total quantity they own as a group by 2.0% from October's record high, down to 1,242.4 tonnes worth $918 million (£745m, €847m, ¥121bn).
Bottom line? In the near term, gold and silver are likely to remain traders' markets, punctuated by spikes and troughs as consumers acclimatize to these higher levels and US data confirm or refute hopes for a turnaround in Fed policy.
To trade these swings in gold for profit, and whether or not gold is driven by US data and events or by speculative hot money in derivatives, forget coins or small bars, and make sure you get full control of your orders 24/7. To cut your costs and get direct access to the spread, setting your own bid and ask quotes as you choose, take a look at BullionVault now.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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