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Retail investors turned bearish on gold in November

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Spectrum Markets, the pan-European trading venue for securitised derivatives, has published its SERIX sentiment data for European retail investors for November, revealing a bearish sentiment for gold, hitting 98 for the month. The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment.

“While there is still a lot of uncertainty in markets, we’ve seen volatility decline, as well as some geopolitical and macroeconomic developments coming through that seem to be reassuring investors, reducing interest in an asset normally prized for its safe haven function”, says Michael Hall, Head of Distribution at Spectrum Markets.


Gold sentiment strays into bearish territory

Immediately after Russia’s invasion into Ukraine in February retail investors fled to gold, resulting in bullish SERIX sentiment figures for the metal over several months. In May gold sentiment reached a record high of 116 points, though it has since declined, and last month strayed into bearish territory for the first time since February.

“Since the war in Ukraine continues, it might come as a surprise that for November as a whole, gold doesn’t seem to be experiencing such high demand from retail investors as you might expect from a traditional crisis asset, though when we look at the SERIX day by day, we do see sentiment trending more bullish towards the end of the month,” said Hall.

He added: “There are several factors at play that are likely affecting investors’ thinking. One factor is caused by the war itself: the disturbed oil and gas market triggered high inflation rates throughout Europe, with central banks responding by increasing interest rates. In a high interest rate environment, other assets tend to be perceived as more attractive than gold, and so we have seen gold prices falling for the last few months, although inflation has reached record highs.”

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Sunak and Meloni restored investor confidence

Political factors could also be playing a part. Europe arguably became more stable since the summer, with countries such as UK and Italy hosting elections where longer-term economic stability was high on the agenda. Both the UK’s Rishi Sunak and Italy’s Giorgia Meloni helped to restore investor confidence as leaders of their respective countries.

In November 2022, 107.1 million securitised derivatives were traded on Spectrum, with 38.9% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

There are some more bullish indicators for gold as we move into December however. Zoltan Pozsar of Credit Suisse this week said gold could go as high as $3600 in the New Year if Russia responds to the G7’s oil price cap by accepting gold for crude oil. “This was the year of the unthinkable macro scenarios and the return of statecraft as the dominant force driving monetary and fiscal decisions,” he said in a note to Credit Suisse clients.

Saxo Markets in its Outrageous Predictions for 2023 also said gold could rise to $3000 “after a challenging 2022, in which many investors were left frustrated by its inability to rally even as inflation surged to a 40-year high.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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