Tags: Ash | gold | dollar | China

BullionVault's Ash: Gold Investors 'Continue to Buy the Dips'

By    |   Wednesday, 04 Dec 2013 12:31 PM

As gold prices have fallen, investors have not shunned the metal as wholly as it may seem. There's still wide scale buying on the dips, says Adrian Ash, head of research at BullionVault, an online gold and silver exchange.

Customers on BullionVault's online metal exchange have repurchased 60 percent of the gold offloaded by investors between April and June, when the metal saw the sharpest quarterly drop in prices since 1983, Ash told CNBC.

Customers also stocked up during the worst November for the dollar price of gold for 35 years, he noted.

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"People are currently pointing at the dollar and saying, you know, the dollar strength is what's hurting gold. Right now it's not true," Ash argued.

What's actually hurting gold right now says Ash is sentiment in terms of bigger money.

If you look at the gold price in sterling, euro or Swiss currencies, prices are already near three-year lows, he explained.

Much of BullionVault's client base is in Europe, and Ash stated investors in the United Kingdom and particularly the eurozone are buying into the dips.

"People continue to buy the dips" in bullion gold prices.

Chinese demand has also "been phenomenal by any measure," he added. Having reportedly overtaken India, China is now the world's largest gold market.

But therein lies the "big lesson for 2013" in the gold market. Strong Chinese demand "obviously hasn't outweighed the impact on prices of what's happened from Western real money allocations," he said.

What really moves gold long term is if you're getting a strong real return on U.S. Treasurys, he explained. If so, "then obviously an investment in gold is going to be less urgent for you."

"Definitely what you've seen in 2013 is the perception of rising rates. . . . If you look at Treasury yields, they've moved up this year, but hardly dramatically," he maintained.

"It's really been about the perception of what is coming down the pipe in terms of real interest rates should the Fed end QE [quantitative easing] at some point. We still haven't had this though. How much of this has been baked into the price already, we don't know. We'll find out maybe in the new year," Ash said.

Investor sentiment is a reliable contrary indicator, MarketWatch reported. The more bearish investors are, the more likely a market is to rally. And closed-end funds (CEFs) are a good barometer of sentiment.

Monday, the Central Fund of Canada, a CEF holding gold and silver, had a net asset value of $14.49 per share, but its closing price was $13.16, according to Morningstar data cited by MarketWatch.

Any investors who purchased shares at that 8 percent discount, essentially purchased gold $100 an ounce cheaper than Monday's market price. History and common sense determines that is a dip worth buying, the article added.

If you want exposure to one of the most widely held and freely traded assets in the world and you can snap it up for 8 percent cheaper than anywhere else, it's hard to argue against it, the article concluded.

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As gold prices have fallen, investors have not shunned the metal as wholly as it may seem. There's still wide scale buying on the dips, says Adrian Ash, head of research at BullionVault, an online gold and silver exchange.
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2013-31-04
Wednesday, 04 Dec 2013 12:31 PM
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