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Who's Buying Bullion And What It Tells Us About The Future

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EDITOR'S NOTE: The MoneyWeek article you’re about to read reports on a somewhat strange phenomenon taking place in the gold market. There’s been a surge in gold purchases, specifically among two professional categories. Investment bankers and doctors (as in medical doctors) have been buying bullion at an increasing pace. It’s just a strange pairing. Increased buying among investment bankers isn’t all that surprising. It does, however, provide us regular folks with important information (and the details are included in the article below). But medical doctors? It seems as if the most successful ones have very little time to do anything else other than activities related to their profession. But again, perhaps that restriction is key to understanding the simplicity behind their decision.

There has been a marked increase in people from two very different professions buying gold coins and bars. Dominic Frisby asks 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 or something. 

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. 

With that 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 queueing 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.

Dominic will be performing his showHow Heavy?, a lecture with funny bits about the history of weights and measures, at the Edinburgh Fringe this August. You can get tickets here.

Originally published on Money Week.

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