New gold investing interest jumped 15% in January from
last year's average...
GOLD INVESTING has been here before –
five times in the last five New Years, in fact, writes Adrian Ash at
BullionVault.
Is this rally for real, or just another fake out?
January's financial turmoil drew the strongest inflow of
new private investors to buy gold and silver for 6 months. New accounts
openings at BullionVault – the world's largest precious metals exchange
online, where private investors currently hold
$1.5 billion of market-ready gold and silver – rose 15% above 2015's
monthly average, led by a 42% rise in new UK users.
But last month's global uptake still lagged the average of
gold's banner year 2011 by two-thirds. What's more, with gold investing
prices rising January at the fastest pace in 12 months (up 4.7% in Dollars,
5.3% in Euros, 8.9% in Sterling) the number of existing owners choosing to
reduce their holdings also jumped, reaching the highest level since the start
of last year.
That saw our Gold Investor Index – which measures the
number of net buyers over net sellers on BullionVault across the month – slip
from 53.0 in December to 51.6 last month.
The financial crisis showed how gold can act as insurance
for your other investing assets. It could offer very cheap cover if 2016's
drop in equity markets continues to worsen.
New interest in gold investing has started 2016 stronger
everywhere, but there's real urgency amongst UK savers. Gold is rising as the
FTSE falls hard with the Pound, reversing the pattern of last year.
Like US Dollar prices, gold in 2015 fell to a series of
new 6-year lows, while UK shares – like US equities – set new all-time highs.
So far in 2016 gold has now risen 9% against the Pound, while the FTSE
All-Share has now lost 5% since New Year.
But gold's gains to date start from a very low base. This
current rise so far only gets gold back to what were new multi-year lows last
summer. So it's not surprising that some longer-term investors are taking
advantage of this New Year gain to cut losses. More active traders have been
quick to take profits.
Silver also saw more private investors choosing to sell in
January than December, but a lack of new interest meant the number of buyers
only just balanced them across the month.
That sent BullionVault's Silver Investor Index sharply
lower to 50.1 from 53.5 in December. Calculated since January 2012, this
index hit a new series low in October 2015, falling sharply
below 50 as sellers outnumbered buyers on the strongest price rise in almost
18 months.
Like January's 1.9% month-end gain, that rise came soon
after silver set new 6-year lows, retreating to 2009 levels together with
gold.
Maybe existing investors are right to sell such spikes.
Maybe the downtrend in precious metals – marking its 5th birthday later this
year – still isn't finished. Maybe thse new buyers have been suckered in,
just like January 2015's buyers might feel.
Bear markets don't end without these kinds of doubts
hounding investors. Bull markets don't start without them, either. Meantime,
the behaviour shown by our Gold & Silver Investor Indices remains
cautious, with longer-standing precious metals owners buying the dips and
selling rallies.
