Monday, 23 April 2012

Sterling gold lowest since 2011: no buyers?

Gold valued in pounds Sterling fell below its lowest (closing) level this year to around $1,010 per ounce today for UK ETF investors. Despite this UK gold ETF investors were mainly sellers.

On 1 January 2012 gold valued in Sterling ended its trading day valued at around £1,012 per ounce. During the day though it had fallen to a £1,006 low. The price of gold has so far remained above this Sterling price in 2012.

 Gold is now slightly cheaper than the last time I bought (4 April 2012). Back then I paid  £1,009 for 10 ETF Securities Physical Gold exchange traded fund (PHAU) shares.

Today I could have got the same for £1,003 - both figures include Hargreaves £11.95 fee. Although PHAU is US dollar denominated it can only be bought and sold in Sterling - at least through my broker Hargreaves Lansdown.

The question for investors is whether to hang on for further falls or to buy now? I haven't bought any more.

Figures from the LSE today showed more sellers than buyers in the big institutional ETFs: GBS and PHAU with not much going on in PHGP, the Sterling denominated ETF favoured by retail investors (pics of PHAU, GBS and PHGP trading levels below). Although in PHGP there were slightly more buyers than sellers.

Eurozone fears dragged gold down as low as £990 per oz on 28 December 2011, it's lowest since July 2011. Will it do the same again? Some of these questions are addressed by BullionVault's lunchtime gold report with analysts generally saying that downside risk is limited.

One factor may be the Indian Akshaya Tritiya festival but despite news of more demand an increasingly weak Indian rupee will make gold look more expensive to Indian buyers. The opposite is true in the UK where the stronger pound makes gold look attractive.

LSE trading levels for PHAU, GBS and PHGP.

Mainly sellers. Do they expect more falls. Does it fit in with ETF Securities owner Graham Tuckwell's claim that ETF investors are sensible?

In this Hard Assets Investor interview (he didn't say whether he's having any luck selling his company ETF Securities) but he did say this about ETF investors: "What we tend to see is if prices run quite high, they will often sell, so we get redemptions. And then when prices pull back, that’s when we get the creations. And you would say, “Well, that’s a very logical thing to do; gee, we’ve actually got logical investors.” Whereas what you find in many stock markets is when it rises like crazy, that’s when all the buying comes in; you know: “When the bellhop is buying, you’ve got to exit.” We see more logical behavior in our products."




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