It’s a tale of two markets: gold futures ended May with the biggest monthly decline since November but physical demand saw a significant increase from last year.
Sales data compiled by the U.S. Mint shows that a total of 95,000 ounces of gold were sold in May, up more than 206% from 31,000 ounces sold in May 2015.
Month-over-month sales was less impressive showing a 24% decline compared to a total of 125,000 ounces sold in April. Looking at the mint’s historical data, May is typically the start of slow season for the market; however, 2016 bucked the trend as this was the strongest May since 2011.
Silver demand was just as impressive as sales increased annually and month-over-month. The data showed that the U.S. Mint sold 4,489,500 ounces of silver in May, up 122% from 2,023,500 ounces sold in 2015, and up 10.5% from 4,072,000 ounces sold in April. This is the fifth consecutive month the mint has seen sales of more than 4 million ounces; in January of 2016, silver coin sales hit almost 6 million ounces.
George Gero, managing director with RBC Wealth Management, said that it is interesting to see the differences between the two markets. He explained that futures markets are weaker as short-term speculative investors slack their exposure to gold in the face of potential interest rate hikes. However, physical gold and silver buyers represent long-term investors.
“Looking at the physical markets you can see signs of long-term strength,” he said. “Coin buyers are going to be selling their physical gold any time soon.”
Phillip Streible, senior market strategist at RJOFutures, said that he is not surprised that investors are jumping into the bullion market. Global financial uncertainty and shaky equity markets makes gold and silver an attractive investment, he said.
“Physical buyers just don’t have any faith in the economy and the system and want a store of wealth they can trust,” he said.
This story originally appeared on Kitco by Neils Christensen on June 1, 2016. View article here.