Gold Investing Sentiment Starts 2017 At 4-Year High

January 6, 2017

Gold Investing sentiment amongst Western households came into 2017 with the strongest end-year reading since 2012.

2016's gold investing demand also set a 4-year record by weight, confirming the upturn in sentiment as prices rose across the year.

Gold gained 9.1% last year against the US Dollar – the first annual gain since 2012 – rising 12.7% in Euros and jumping 31.6% for UK investors as the Pound sank amid the Brexit vote.

Hitting a half-decade high in November at 59.3, the Gold Investor Index ended 2016 at 55.5 – higher than the previous 12 months' average of 54.3, and well above the 53.0 reading of December 2015.

The index measures the number of people starting or adding to their own private gold holding against those reducing or selling entirely. It would read 50.0 if the number of net buyers exactly matched the number of net sellers across the month.

BullionVault's Gold Investor Index hit a series peak of 71.7 in September 2011, and bottomed at 50.5 over winter 2014/2015.

Net of investor selling, gold demand from BullionVault users – 89% of whom live in North America or Western Europe – was also the strongest in 4 years by weight, totalling 2.7 tonnes.

That was 52% ahead of 2015's net demand, and marked the strongest addition since 2012's growth of 4.7 tonnes. It took client gold holdings to a new high above 37.2 tonnes – more than most of the world's central banks hold in reserve.

Silver holdings meantime grew to a record 647 tonnes as 2016 demand reached almost 100 tonnes, fully 70% ahead of 2015 and the highest level since 2011's record of 148 tonnes.

Zurich was again the most popular location for buying and holding both metals, accounting for 64% of 2016's net gold demand and 80% of net silver investing against the other locations of London, New York, Singapore and Toronto.

The Silver Investor Index fell back to 53.3 last month from November's level of 56.2, ending 2016 just shy of the previous December's 53.5 reading.

Again, this series shows the balance of net buyers over net sellers across the month as a proportion of all owners at the start, rebased to 50.

Together, BullionVault's Gold & Silver Investor Index series provide a unique window on private-investor sentiment in physical precious metals, using proprietary data from the world's leading internet and smartphone platform for trading physical precious metals.

Launched in 2005, BullionVault has now enabled more than 65,000 private investors across 183 countries to benefit from the low dealing costs, deep liquidity and ultra-high security of the wholesale bullion market. It was used to trade £689m (unaudited; $843m, €768m) of physical gold and silver in its financial year-ending 31 October – higher by 28% from 2015 – matching an average of almost 5,000 deals for customers each week.

Looking ahead, 2017 calendars are packed with political and financial risk events, from Donald Trump having to negotiate a new US debt ceiling in March to the raft of Eurozone general elections starting this spring.

These dates will focus the broader investment stresses of slowing growth, growing debt and nascent inflation. Gold and silver are likely to regain favour with fund managers, but private investors aren't waiting for consensus to turn around. They continue buying financial insurance at a discount to the Brexit peak hit last July. 

Adrian Ash is head of research at BullionVault, the physical gold and silver market for private investors online. City correspondent for Bill Bonner’s Daily Reckoning from 2003 to 2008, and previously head of editorial at London's top publisher of private-investment advice, Adrian is now a regular contributor to many leading analysis sites including Forbes and Gold-Eagle, and a regular guest on the BBC as well as international broadcasters. His views on the gold market are frequently quoted by the Financial Times, Daily Telegraph, MarketWatch and many other leading new outlets.

 

In the Aztec language the name for gold is teocuitlatl which means "excrement of the gods."