Gold price slump attracts investors

A fall in precious metal prices is presenting a buying opportunity

Investors are snapping up gold as uncertainty looms, according to figures from online market BullionVault. The site saw a 23.5 per cent increase in the number of users buying gold in July. Gold is typically in greater demand at times of uncertainty, as it is perceived as a safe, physical store of value.

However, it could be that investors have simply been taking advantage of the fact that the yellow metal’s price fell to its lowest level in a year in July. The gold price is down 7.2 per cent from April, when it reached a 20-month high. Today the gold price is at $1,210, down 4 per cent over the past year.

Despite that, BullionVault’s sentiment index towards the precious metal reached 56.8 (above 50 is positive) in July, its sharpest three-month increase since the end of 2012.  (Its highest ever value was 71.7 in September 2011.)

Buyers of the metal outnumbered sellers by more than four to one in July, with the number of people offloading gold down 10.8 per cent from the previous month, to the lowest level in a decade.

BullionVault says eurozone investors are the most bullish on the metal, with buyers on the continent outnumbering sellers by more than six to one. 

Adrian Ash, director of research at BullionVault, says: ‘The last time so few people chose to sell gold was the eve of the worst global economic slump since the 1930s. If there is any wisdom in crowds, savers and investors should take note.

‘While last month’s action was clearly spurred by the drop in the gold price, it shows strong conviction among investors to keep and add to their bullion holdings.’

While an increase in the number of investors buying gold bullion may help to drive the price of the precious metal higher, funds specialising in the commodity are struggling to generate returns.

The BlackRock Gold and General fund is down 10.8 per cent over the past year and Old Mutual Gold & Silver 10.5 per cent. Money Observer Rated Fund Ruffer Gold has returned 1.8 per cent over the same period.

Sentiment towards silver also climbed in the month as prices fell to their lowest monthly average since March 2016. The last time there were so few silver sellers on BullionVault was August 2010. 

Today the silver price is at $15.32, down 6.7 per cent over the past year. 

 

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