OGNRF - Investors Move Toward Gold | Benzinga
Source: Adrian Day 04/10/2024
Global Analyst Adrian Day looks for signs that investors are finally turning to gold, and provides an update on developments at a couple of stocks on his list.
A month ago, we wrote about the drivers of the gold price and, in particular, who was buying; at that point, it had gone up $190 in the previous month. Now, it is up another $150 over the past four weeks. Though central bank buying remains the prime driver of higher gold prices, there are indications of a shift from institutional and retail investors that could see gold move significantly higher from here.
Most reports on various avenues of gold buying are lagging, so we can't be sure what has happened in the past few weeks. Central banks, which bought 1,037 metric tonnes in 2023, a little shy of the 2022 record, are continuing to buy this year. Complete global data for February is not yet available, but the countries that have reported suggest continued buying. So far, almost 19 tonnes of net buying has been reported. That's down from over 45 tonnes in January.
So far, some of the largest recent buyers have reported, including China, which bought over 12 tonnes in February, up from ten the month before and the highest number since October. A broad range of countries also bought, including the Czech Republic, Kazakhstan, Qatar, Turkey, and Mauritania. The buying was offset by a large sale of almost 12 tonnes from Uzbekistan, which has been both a large buying and selling over the past two years. We do not know where the February number will end. So far, though strong, it represents a slowing of the trend of the last two years.
Retail Buyers Are Still Not in the Market
Similarly, we do not have global reports for coin sales, but anecdotal evidence suggests only a slight shift toward buying in recent weeks. Coin dealers in both the U.S. and Europe are reporting a pick-up in interest from gold buyers but still say flows are neutral at best; coin premiums are reflecting weak sales.
We do, however, have up-to-date data for gold ETF flows, and that shows a shift in the last few weeks. There have been inflows the last two days (Wednesday and Thursday; Friday's data have not yet been reported) as gold tackled $2,300, but outflows for four of the five days before. So, it is too soon to say that there has been a clear reversal, though any inflows are somewhat encouraging after 18 months of steady outflows. The selling has continued this year, for a total of 3.4 million ounces so far. (See graph on next page.) In context, the ETF buying on Thursday, 37,484 ounces or just over one tonne, is little more than one-third of what the central banks have been buying every single day.
So, it seems clear that retail and institutional investors are not what is continuing to drive the gold price.
Ongoing reports on central bank buying will tell much of the story. However, there also appears to be a new source of demand, and it is not retail or traditional investors.
Rather, we suspect it is wealthy families and institutions, primarily in the Middle East and Asia but also in Europe, looking for an ...