Private investment in gold

Net retail investment in gold between 1993 and 2000 ranged between 240 and 390 tonnes per year (excluding a 117-tonne anomaly in 2000), according to a study by Gold Fields Mineral Services.

The report, titled Retail Gold Investment and Private Investor Stocks — A Review and commissioned by the London-based World Gold Council, traces the investment trends of various countries and provides estimates of their bullion stocks.

Says GFMS Managing Director Philip Klapwijk: “This relative stability [in retail investment in gold] is remarkable if you consider that these years cover the Asian financial crisis and the Y2K scare.”

The report cautions that relative importance of retail in overall gold demand should not be overstated. On average, retail accounted for 7% of total demand each year for 1993-2000, and this is but a fraction of the value of investment in other products, especially equities.

The study also points out that retail investment during the period differed considerably among various regions. Europe liquidated more than 200 tonnes of gold, North America invested 300 tonnes, and the rest of the world saw heavy net investment of more than 2,200 tonnes.

Among the factors that undermined investment in this period, especially in Europe and North America, were: gold’s declining price; a lack of promotion; the boom in other assets, such as equities; low inflation; and the use of the U.S. dollar as a safe-haven investment. The report goes on to say that many of these trends have slowed and that the stage is therefore set for a resurgence in gold investment.

The study also provides an estimate of private investor stocks by country. Of the estimated global total of 22,000 tonnes, GFMS believes 40% is held in Europe, whereas 15% is held in North America. The five countries with the largest holdings are France, the U.S., Japan, Switzerland and Germany.

— Gold Fields Mineral Services is an independent London-based company engaged in commodity research and consulting.