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Is it time to start investing in gold and silver bullion?

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Gold sentiment among UK and other Western investors rose again in May, reaching its strongest in 11 months on precious metals marketplace BullionVault as gold extended its run of new record prices in US Dollar terms.

Gold profit-taking among users of BullionVault eased back for the second month running. The number of first-time precious metals buyers was more than 50% above its prior 12-month average.

“Having seized the gains offered by central banks and Chinese investors driving gold prices up to new record highs, Western profit-taking looks to be nearing exhaustion,” according to Adrian Ash, director of research at BullionVault. “New interest in buying physical gold has rebounded as 2024’s packed election schedule adds domestic uncertainty to global tensions and conflicts.”

While gold priced in the US Dollar rose 1.7% in May to set its THIRD new month-average high in a row at $2352 per Troy ounce, the gold price in UK Pounds edged back 0.2% from April’s fresh record to £1862.

The number of buyers across the month slipped by 8.1% from April’s 10-month high, but the number of sellers more than halved, down by 51.5% to the fewest since August last year. Together that pushed the Gold Investor Index – a unique sentiment measure based solely on trading behaviour among the Western world’s largest pool of precious metals investors – higher by 2.8 points from April to 54.4.

The highest reading since June last year, that was 6.9 points above March’s record low of 47.5. Any reading above 50.0 signals more net buyers than net sellers across the month. The Gold Investor Index set a decade-high of 65.9 as the Covid Crisis took hold in March 2020.

Gold sentiment chart

“While this spring’s run of new record prices may be running out of steam,” says Ash, “gold’s unique appeal as a financial and geopolitical hedge puts a solid floor beneath the market. That will only be strengthened as the much-delayed start to Western central banks cutting interest rates finally arrives. Last time the Gold Investor Index was this high, gold prices were £350 cheaper per ounce.”

Are investors more committed to the bullion market now?

As a group, investors using BullionVault sold just 134 kilograms more gold than they bought as a group in May, liquidating less than half the quantity sold in April and trimming their aggregate holdings by 0.3%, the smallest net outflow since January.

That took the total quantity of gold now held in each user’s choice of London, New York, Singapore, Toronto or (most popular) Zurich down to 45.1 tonnes, the lowest end-month weight since September 2020. But that securely stored and insured stockpile held unchanged from April’s new record value above £2.6 billion.

The number of first-time bullion investors meanwhile slipped in May by 17.3% from April’s 13-month high, but it was 51.3% greater than the 12-month average worldwide – led by a steep rise in the number of new users in the USA, France and Spain – as the number of new first-time UK users rose 37.9% from the prior 12 months’ average.

Silver sentiment chart

Interest in silver also rallied

The Silver Investor Index also rallied further in May from March’s new all-time low, but it continued to signal more sellers than buyers across the month with a reading of 48.0 – only 0.7 points higher from April and 3.0 points above the month before – as the more industrially-useful precious metal set its highest month-average price since September 2011 at £23.28 per Troy ounce.

Also like gold, selling by BullionVault users outran demand by the smallest margin since January, albeit with a further 1.1% outflow of almost 13 tonnes. While that took total silver holdings down to a 40-month low by weight beneath 1,155 tonnes, the value rose to a new record, topping £900 million for the first time.

Says Ash: “Far from a rush for the exits, the gold and silver selling by Western investors in the first half of 2024 has signalled profit-taking and rebalancing. Even so, this spring’s turnaround in sentiment is coming off a very low base. It could give a big impetus to new price gains as this year’s political tensions and uncertainties unfold.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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