Strongest gold and silver investing since Trump victory...
Gold investment ended 2017 with a bang as demand hit a 13-month high at here at BullionVault, writes director of research Adrian Ash.
BullionVault users added almost two-thirds of a tonne to their total holdings in December, the heaviest net investment demand since November 2016 saw Donald Trump win the US election.
That inflow of 659 kilograms took their total holdings – vaulted in each client's choice of London, New York, Singapore, Toronto or Zurich – to a new record of 38.7 tonnes.
December also saw the strongest month of 2017 for silver demand, with BullionVault users buying 10.9 tonnes net of client sales, the heaviest addition since Nov 2016.
That took total BullionVault client holdings of silver to a new record above 700 tonnes. But for both metals, 2017's stockmarket boom saw private investment respond tactically to bullion prices – taking profits, buying the dips, and almost halving net demand from the year before.
Full-year 2017 gold investment demand totaled almost 1.5 tonnes on BullionVault, down 45.5% from 2016's four-year record of 2.7 tonnes. Last year's total silver inflows meantime totaled 53.8 tonnes, down 46.0% from 2016.
For 2018 the key as ever will be what happens to other asset classes. Investment demand for gold is likely to remain muted if the stock market's bull run continues. But the best time to buy insurance, of course, is before you need it – a fact BullionVault users appear to understand.
As 2018 approached, December saw global stock markets close out their 5th annual rise in succession on the MSCI World Index, while crypto-currency Bitcoin sank more than one-third after setting fresh record highs, more than 12 times its price at the start of last year.
The gold price meantime fell 1.6% on its daily average to set a 5-month low in Dollar terms. And for the 11th month of 2017, the Gold Investor Index moved in the opposite direction, rising to match May's peak at the highest level of the year at 55.3, up from November's 53.9 reading.
The BullionVault Gold and Silver Investor Indices provide a unique window onto private-investor sentiment in physical bullion. Using only proprietary data from BullionVault, the 24-hour precious metals exchange online where 89% of users live in Western Europe or North America and now caring for $2 billion of client property, each 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.
Learn more about the Gold Investor Index methodology in this article for bullion trade body the LBMA's Alchemist magazine. A reading above 50.0 indicates more buyers than sellers. The Gold Investor Index peaked at 71.7 in September 2011, and set half-decade lows at 50.5 around New Year 2015. Its solid pattern in 2017 of moving inversely to prices – meaning that the balance of private investors buying was greater when prices fell and smaller when they fell – is unprecedented on the data series, starting in October 2009.
As the month-average gold price slipped in December, the number of private investors using BullionVault.com to start or add to their gold holdings rose 11.4% last month from November. Reaching a 3-month high, that was some 7.8% larger than the previous 2017 monthly average. The number of gold sellers in contrast fell 12.5%, dropping 21.3% from Jan-to-Nov. 2017's monthly average.
The number of silver buyers meantime jumped 27.2% last month from November, reaching the largest total since July as the month's average silver price fell over 4% against the Dollar to a 5-month low at $16.16 per ounce.
In contrast to buyers, the number of silver sellers fell alongside prices, down 28.4% to its lowest level since July. Together that pushed the Silver Investor Index up from 51.0 to 53.9, the highest reading since July.
Despite the festive season, December's drop in precious metals prices also saw a sharp upturn in the number of first-time users on BullionVault, up 14.8% from November to the fifth largest influx of new precious-metal investors of 2017.
6.4% ahead of the 5-year average, December's upturn in new interest was led by growth in new users from Germany and Italy.
Across 2017 as a whole in fact, only Germany has grown faster than its 5-year average amongst BullionVault's top 10 markets. There are no doubt cultural reasons for this, as we examine in this article for the World Gold Council's latest Gold Investor magazine. But perhaps the single greatest reason is the country's famous attitude towards insurance.
Savers elsewhere now planning their investment strategy for 2018 might do well to take note. The past cannot promise the future of course. But gold has risen ever year that the S&P500 index of US stocks has lost 10% or more. Putting just one-tenth of a portfolion otherwise split 60:40 between equities and bonds would have halved the worst loss for UK investors of the last 40 years, when the Lehman's collapse saw markets crash worldwide a decade ago.
The global financial crisis may seem a long time ago today. But the US stock market has risen ever year since – its second-longest unbroken run ever. Gold isn't guaranteed to rise when the S&P next falls. But that drop in equities is a question of when, not if. History says gold has offered a simple and useful route to investment diversification throughout modern times.
