So, Who's Been Bidding Gold Higher?

By: Adrian Ash | Wed, Oct 3, 2012
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A unique, innovative tool for seeing just what private investors are doing in gold...

Gold was up, up and away in September. But who was doing the buying?

New data we released today here at BullionVault show that private households across Western Europe and the US continue to join the bull market. But their response to QE3 and the latest phase of the Eurozone crisis is more measured - you might even say complacent - than the recent price action alone suggests.

Gold Investor Index vs Gold Price Month Average Chart

"There has until now been a lack of hard data on self-directed retail investors in gold," said Marcus Grubb of the World Gold Council, which is a shareholder in BullionVault, at today's launch here in London of our new Gold Investor Index.

"For instance, the data we produce [the excellent Gold Demand Trends] is more at the macro level, including institutional and private wealth management. This new Gold Investor Index is a real innovation - a unique and useful addition to the data already available. It's a coincident indicator of what private households are choosing to do with regards to physical gold."

How so? BullionVault's new Gold Investor Index is a monthly data point based on actual trading on BullionVault, the world's largest provider of physical gold ownership to private investors. Since launch in April 2005 it's now been used by more than 42,000 private investors from 159 countries worldwide.

Almost 90% of BullionVault users live in the UK, US or Eurozone. So the Gold Investor Index shows what the largest pool of private gold investors in the developed Western world is doing with its metal - either buying more or selling, or choosing to sit tight. They can all make that decision as they choose using BullionVault's peer-to-peer exchange online, a truly international market in physical bullion which is accessible to people all over the world. You will not find a more reliable guide to the wider retail-investment market in physical gold.

How does BullionVault's Gold Investor Index work? First, it takes the balance of net buyers (who added to their holdings, and so includes new entrants) versus net sellers over the last calendar month. The index then shows that figure as a proportion of all existing gold owners to give a comparable series over time. The index is rebased so that a perfect balance of buyers and sellers would give a reading of 50.0.

In September this year therefore, and as the chart shows, self-directed investors in the West grew more bullish on gold. Rising from August's reading of 52.1 to 52.5, however, the Gold Investor Index still lagged levels seen earlier this year, and it was well below the series-record to date - the level of 71.7 hit in September 2011.

So, September 2012's reading on the Gold Investor Index undoes any talk of a "gold bubble" amongst Western households. Because the private investor response to QE3 and the latest phase of the Eurozone crisis is far more measured than the last time gold prices reached their current level. This may give succour to central bankers and other policymakers hoping to buy time. The index suggests households are less anxious about inflation or a currency crisis than bank analysts and managed wealth advisors.

It's hard to find any gold bears amongst professional investors right now. Amongst self-directed retail investors too, sentiment towards gold is bullish. But hard transactional data from the world's largest pool says they're not as bullish - in aggregate - as they were earlier in the year. And sentiment towards gold is way below the moments of extreme investor stress seen previously in this financial crisis, such as late-summer 2011.

The new Gold Investor Index confirms what we're hearing from our friends and contacts in the coin and small-bar business. Sales have been lacklustre since spring. That may change, however, if the UK's over-valued Pound, the Eurozone's unceasing crisis, and the US fiscal cliff crash into each other towards New Year. Either way, the new Gold Investor Index will clearly show how private investors respond.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

© BullionVault 2006-2014

Please Note: This article is 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.

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