Today we consider who is buying gold and why.
Are the people at the top – the directors – buying or selling shares in their own
company?
If they are buying, that’s usually a good sign.
But if they’re selling, not so good.
They might be selling because they need the money to buy a property for example, or to
pay school fees.
Then again, they might be selling because they don’t like the look of what’s going
on.
Directors’ dealings offer telling signals as to whether insiders think the company is
about to thrive or dive.
That’s why so many follow them.
Withat in mind, I had a meeting with Joshua Saul yesterday, CEO of bullion dealer and
storage company, the Pure Gold Company.
He told me something that I found fascinating - similar to the value of director dealings
as a potential indicator.
I’d like to share that knowledge with you today.
Who’s been buying bullion and why?
Why are doctors queuing up to buy gold?
The Pure Gold Company must now be one of Europe’s top bullion dealers, with a large and varied
customer base, from institutions to individuals.
As such, it knows who is buying, who is selling and to what extent.
But, to help them make the right investments, it also makes an effort to get to know its
clients: are you old or young?
What do you do for a living?
Why are you interested in buying gold?
And so on.
As a result, they gain an insight into people’s professions and motivations and that data,
“both quantitative and qualitative”, to use Saul’s words, “reveals trends about
the market”.
There has, over the past couple of months, been a marked increase in buying from two
professions: doctors and investment bankers.
Weird, huh?
The latter I sort of get, but the former.
Most doctors I know work pretty hard.
Their diaries are full and their time is precious.
Unlike many other professions, I would venture that their ability to monitor markets, research
investment ideas and so on is limited.
(Any doctors out there, please correct me if I’m wrong).
You have to be bright to make it through medical school, to qualify and practice, so doctors,
for the most part, are not stupid.
But at the same time, I would say, as a rule, that their fingers are not particularly on
the investment pulse, unless their investments are somehow related to the medical field – which
gold isn’t.
So what gives with doctors buying bullion?
Doctors for the most part have money.
It’s a well-paid profession.
In some cases very well paid.
And they are making money all the time.
“My belief,” says Saul “is, first, they’ve been too busy up until now to take much of
an active role in their investments, but having seen their pensions fall, have started to
to be more proactive – driven primarily by safety and security”.
Makes sense.
They’ve been making good money, but on the other hand, they have been watching the value
of their Isas and pensions fall quite dramatically.
As a result, they are turning to the alternatives, which are gold and silver.
Investment bankers are getting keen on gold again
“Why then has there not been an uptick in, say, lawyers or pilots or computer programmers?”
I ask.
There has been, it turns out, but the most notable increase has been doctors – by 44%
in the last four weeks – and, as we are about to consider, investment bankers.
Investment bankers’ buying of coins and bars has increased by a – quite astounding,
in my view – 59% over the past four weeks.
I have to say, the implications of a 59% jump in investment bankers buying gold for their
personal portfolios has some alarm bells ringing.
What’s going on at the banks?
Are there problems looming?
What do they know that we don’t?
Something similar was going in the lead up to the Lehman crisis.
Possibly so.
When asked about their motivation and timing, says Saul, many cited counterparty risk, exacerbated
by the severe inflationary environment.
Political uncertainty has been a factor too.
Many fear inflation.
The high cost of sitting in cash while waiting for opportunities in other asset classes,
has become too high.
The other factor cited was the consequences of escalating interest rates at a time of
high and increasing debt, both individually and nationally.
Overall, says CEO Saul, there has been a 39% increase in people purchasing gold bars and
coins in July compared to the monthly average over the last 12 months, and a 42% increase
in people purchasing silver bars and coins.
Perhaps more tellingly, there has been a 67% increase in people selling equities within
their pension to purchase physical gold bars within the same vehicle.
This type of knowledge may mean absolutely nothing.
I don’t think it’s reason alone to go out, sell everything, buy gold and run for
the hills.
But it’s one of those telling insights, I’d say, to have at the back of your mind
as you make your broader macro investment decisions – how you determine your asset
allocation.
People are buying bullion.
Especially investment bankers.
It also explains the uptick in people asking me how to buy bullion.
If you’re concerned about geopolitics or inflation or solvency, and you feel an investment
that is “outside the system” and “no one else’s liability” is worth having,
this is the type of thing that might cap your thinking and seal the deal.
So there we go, I’ll leave it with you to make of it what you will – a bit like those
director dealings.
Thanks for watching.
if you're interested in buying bullion check out the links in the comments.
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