The vast majority of
investors either retained or added to their holdings of silver and gold after
prices fell sharply in the spring, a survey suggests. | telegraph.co.uk
When asked whether they had made any changes to their
precious metal investments over the past year, 37pc of investors said they
hadn’t changed their allocations to silver and gold, while 43pc had increased
their holdings.
Just 14pc of investors said they had reduced their holdings,
while 4pc had switched from gold to silver. Only one in 100 said they had sold
all of their holdings of the precious metals while 0.7pc had moved from silver
to gold.
The survey was conducted by BullionVault, which allows
individual investors to own gold and silver without taking possession.
The strong support for the metals came despite the survey
being conducted in June, just after a major sell-off that saw the price of gold
tumble.
Having peaked in autumn 2011 at almost $1,900 an ounce, the
price fluctuated between $1,600 and $1,800 for much of the next year, before
beginning a sharp decline from October 2012. In June it fell below $1,200 but
staged a recovery in July, rising by 7.6pc.
Separate research has found that the top seven best
performing funds in July were all related to gold. Gold funds tend to own
shares in gold mining companies, whose shares rose more sharply than the gold
price, gaining 9.7pc over the month.
The best performing fund was the Way Charteris Gold
Portfolio, which climbed by 24.9pc in July, according to Hargreaves Lansdown,
the fund supermarket. Next was Smith & Williamson Global Gold &
Resources, which gained 19.5pc over the month, and Old Mutual's BlackRock Gold
& General fund with a 19.3pc rise.
Adrian Lowcock of Hargreaves Lansdown said the rally was due
to indications from America's Federal Reserve that the withdrawal from
quantitative easing – so-called "tapering" – would be slower than
previously thought.
“Investor confidence returned in July as the Fed confirmed
that it would continue purchasing $85bn a month of bonds," he said.
"The Fed gave a broad outline of how QE tapering will proceed, reassuring
investors that tapering was dependent on continued economic growth.
"Investors responded positively to the comments and
gold rallied strongly in July. Continued QE is considered good news for gold as
it increases the likelihood of higher inflation at some time in the
future."
He added: "Gold shares have fallen a lot further than
the actual price of gold this year and in July they also rebounded quicker.
Traditionally gold mining companies have been more volatile than the underlying
asset as they are a 'geared' investment to the precious metal. They lagged behind
as the gold price rose in previous years but have tracked the price more
closely this year."
Top performing funds in July 2013
Fund Rise
Way
Charteris Gold Portfolio 24.9pc
Smith
& Williamson Global Gold & Resources 19.5pc
Old
Mutual BlackRock Gold & General 19.4pc
Investec
Global Gold 18.7pc
BlackRock
Gold & General 18.5pc
Junior
Gold 17.4pc
Ruffer
Baker Steel Gold 16.4pc
Axa
Framlington Biotech 14.6pc
MFM
Techinvest Technology 12.3pc
FF&P
US Small Cap Equity 10.9pc
Miguel Perez-Santalla of BullionVault said: "For many
private investors gold and silver is a long-term investment choice, and many
precious metals investors are still feeling the sting of the last global
economic downturn. They are clearly still very cautious about announcements and
forecasts heralding signs of life in the economy that could tempt them away
from precious metals.
"With this
continued uncertainty and combined with the drop in price of precious metals,
there is an opportunity to not just hold on to current investments but to also
increase exposure further to protect savings and investments against any future
shocks."
Gold mines output set to reach record
ReplyDeleteOutput from the world's gold mines is set to hit record highs this year, disappointing bulls who are impatiently waiting for production cuts following this year's 24 percent plunge in prices. Some gold miners have felt the squeeze of lower prices this year, and a number, including Canada's Kinross and Russia's Polymetal, suspended marginal mines and projects after a dramatic first-half price drop.
But as prices fall, others are actually increasing output to maintain revenue and profit levels. In some cases, they are targeting higher grade ore to keep marginal mines operating and generating cash, at the expense of future production. Furthermore, several large projects put into motion during gold's 12-year rally, which took it as high as $1,920 an ounce in 2011, are coming to fruition.
"Our expectation is that we're going to see a fresh record high in gold mining output this year," GFMS analyst William Tankard said. "What we're seeing is an ongoing response not to the slide in prices, but the decade-long stretch of fairly heavy capital investment into the mining industry that preceded it." The world's top three gold miners - Barrick Gold, Newmont Mining and AngloGold Ashanti - all reported higher production in the most recent quarter.
For some marginal mines, firms are planning to tap better grades up front, a practice known as high-grading, which often comes at the expense of shortening the life of a project and giving up lower grade ore that could have been economic later. African Barrick Gold, for example, re-engineered its lowest grade and highest cost mine, Buzwagi, to tap higher grades and move less material, hoping to ensure the operation generates cash.
"In the short term, when they have got flexibility, you can see companies changing the ore mix to keep themselves operating," Nomura analyst Tyler Broda said. During the boom years, the cost of gold mining soared. But this year the average cost of producing an ounce of gold is already showing signs of retreating, according to metals consultancy Thomson Reuters GFMS.