Gold Investing Goes AWOL As Google Searches To ‘Buy Gold’ Hit 11-Year Low
This article was originally published on June 5, 2018 in Forbes
Gold investing is often seen as a barometer of fear and financial stress.
But while the bullion price has responded to 2018’s stock market drops and geopolitical tensions so far, appetite for gold is in fact weakening among private investors overall.
2018 has already seen gold trade above $1300 per ounce on more days than all of 2016 and 2017 combined. Yet instead of embracing this uptrend, existing owners are selling while the number of new gold investors just fell to fresh multi-year lows.
Aug. 6 to Sept. 1 2018 in fact saw the fewest Google searches to “buy gold” since July 2007 – the eve of the global financial crisis.
The giant SPDR Gold Trust (NYSEArca:GLD) shrank 4% across May, erasing the previous two months of share issuance growth with the heaviest 1-month outflow since August last year.
The U.S. Mint meantime reports selling 24,000 ounces of American Eagle gold coins, up sharply from April’s 10-year low as dealers re-stocked inventory but still barely half the last 5 years’ average for May.
Here at BullionVault, May saw the lowest number of new precious-metal investors since May 2014. Down 27.7% from the previous 12-month average, the number of people using our online gold, silver and platinum market for the first time totalled just 57.2% of the last 5 years’ average monthly count of new customers.
Overall, the number of people starting or increasing their gold holdings rose 12.1% from April’s 27-month low, but the number of gold sellers on BullionVault rose 22.8% to a 4-month high.
Together that edged the Gold Investor Index – our proprietary measure of Western private-investor sentiment built solely from genuine trading activity – down to a 9-month low of 52.4 from 52.5 in April.
Calculated back to the fall of 2009, the Gold Investor Index hit a series peak of 71.7 in September 2011, and fell to a series low of 50.5 at New Year 2015.
A reading of 50.0 would indicate the number of people buying across the month exactly matched the number of sellers as a proportion of all existing owners at the start of the month.
So in May 2018, that reading of 52.4 means gold buyers outnumbered sellers. But they failed to outweigh them, with clients liquidating 85 kilograms as a group after selling 98kg in April.
That pulled total client holdings – vaulted in each user’s choice of London, New York, Singapore, Toronto or Zurich – down 0.5% from end-March’s all-time record high of 38.8 tonnes.
Why this multi-year lack of interest?
Boredom plays a part. On a 3-month basis, gold prices this spring have moved in a narrower range than any time since the doldrums of the mid-1990s, a mere 3.6% high-to-low. Only the early 1990s and 1986 saw less action in gold since early 1971, back before the US abandoned the Gold Standard and its $35 per ounce peg per ounce.
Profit-taking weighs more heavily, most especially among non-US and more recent buyers. Priced in the Euro, gold last week hit 11-month highs amid the turmoil in Italy’s bond market. Gold has also reached 8-month highs against the British pound, which remains highly vulnerable to the UK government’s failure to make any progress in its Brexit negotiations with the European Union.
Such two-way action is common on our platform, where investors can sell as easily as they buy. But the more traditional coin and small-bar market is also now seeing selling by longer-term owners, despite the heavier dealing costs.
Whether these sellers are switching into equities or perhaps cryptocurrencies, their turn away from gold might suggest complacency if not ignorance of 2018’s growing financial and political risks.
Contrarian investors considering an allocation to gold as financial insurance take note.
This article originally appeared in Forbes.