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Ben Traynor

Ben Traynor

Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and…

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Gold: 'Monetary Collapse Insurance'

Why investors are turning to gold ahead of 2013...

Although the price of gold has fallen over the last couple of months, there has been a marked increase in demand for physical bullion.

The amount of bullion held to back gold exchange-traded funds has risen to record levels. November meantime saw the United States Mint record its best month for sales of gold American Eagle coins since July 2010.

Western gold investors clearly see good reasons to add to their positions. The Gold Investor Index tracks the buying and selling activity on BullionVault, the vast majority of whose users are in the United States, United Kingdom or Eurozone.

The Gold Investor Index rose to a six-month high in November, the fourth straight monthly increase. In total, BullionVault users added 559 kilos of gold to their bullion holdings, the second month in a row they've added half a tonne.

We asked a few of our users why they've been buying gold recently, as well as what they expect from 2013.

Among those who added to their holdings last month the principle reason given for buying gold was as part of their long-term savings strategy. Another major reason given was central bank policy.

"Central banks will carry out more quantitative easing to relieve pressure and try to stave off a serious economic setback," one BullionVault user said, "while the economy will slowly stagnate. Expect mediocrity and stagnation (Japan-style), not disaster."

"We are still not over the worse," added another.

"And the global wallpapering over what are incredibly large economic cracks is extremely worrying."

Increased demand for gold may simply mean Western investors have on aggregate grown more bullish towards the metal in recent weeks. But it may also mean they have become more concerned about what the coming year holds in store.

"Politicians, having wrecked the market mechanisms with ever larger interference and greater levels of debt, now have little choice but to devalue paper money, and probably allow national defaults on sovereign debt," one user replying to our survey said.

"Even a doubling of personal tax on the so-called wealthy will not fix a fundamentally flawed out of control 'entitlement' state let alone pay down the incredibly irresponsible build-up of national debt in the Western world."

"I think 2013 will be a bad year in all markets," another survey respondent added, "but can offer some buying opportunities in gold for the long term."

Another added that they view gold as a "long run strategy for buffering inflation", while a third called gold "monetary collapse insurance".

Those of us who work in gold investment are sometimes accused of being doom and gloom mongers, often with some justification. With this in mind, we'll finish on a positive note with our final quote from our survey:

"I always look forward with hope, because private investors now have options."

 

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