Gold investing proves ‘resilient’ to 2022’s inflation crisis

Private investing in gold edged back in June from the highest level in almost a year, while bullion prices fell but continued to hold firm for 2022 so far, contrasting with the first half’s slump in shares, bonds, base metals and crypto.

That’s according to the Gold Investor Index, a unique measure of trading behaviour among users of BullionVault. The world-leading precious metals platform online and by smartphone, it now cares for £3.0 billion ($3.6bn) of gold, silver, platinum and palladium for more than 100,000 private investors worldwide.

Global stock markets lost 21.2% over the first 6 months of the year on the MSCI World Index, while Bitcoin dropped 26.2% amid soaring inflation, rising interest rates, the strongest US Dollar in two decades, and Russia’s continued invasion of Ukraine.

Gold finished last month at its highest-ever mid-year prices, ending June flat from New Year’s Eve in terms of the US currency at $1817 per Troy ounce and adding 10.9% in British Pounds at £1493.

BullionVault director of research Adrian Ash said, “If ever gold’s appeal as a safe haven needs confirming, its resilience during this year’s wider market turmoil is striking. Physical bullion was the best-performing asset during the initial deflationary wave of the Covid Crisis, when crude oil prices sank below zero. It has now outperformed all major asset classes except crude oil as inflation jumps to 40-year highs.

“Looking ahead, the rise in central-bank interest rates, although too little too late for cash savers, does present a headwind to gold prices, because the metal pays no income. Against that, the risk of recession becoming longer-term stagflation is likely to see portfolio managers and other existing investors continue to hold tight to gold as a form of insurance, and the metal’s success in 2022 so far is likely to attract fresh inflows if the slump in world stock markets continues in the second half of the year.”

The number of gold buyers on BullionVault – almost 9-in-10 of whose users live in Western Europe or North America – fell 17.0% across June compared to the previous month, while the number of sellers rose by 8.6%.

Together that took the Gold Investor Index – which would read 50.0 if the number of buyers was matched exactly by the number of sellers – down to 54.5 from the 11-month high of 56.2 reached in May.

Like the gold price in Dollars, that was almost unchanged from New Year 2022, adding 0.3 points from end-December’s reading.

Demand by weight was meantime very nearly matched by investor selling, with total client holdings – securely vaulted and insured in each client’s choice of London, New York, Singapore, Toronto or Zurich – growing by just 1 large bar of Good Delivery gold (13kg) to remain a little below 47.5 tonnes.