UK Investors Buy Physical Gold in Record Numbers - Target Price for Next Leg Increases

Is the gold bull over given the past two days of serious price smackdown?

In a word - No. Not even close. The gold bull is still intact and healthy, and going through the same corrective pattern it has seen several times over the past five years.

Additionally, the high risk in the banking sector is driving more people to allocate a portion of their personal wealth into the safety of gold. This buying offtake of supply is likely to strengthen the bull market over time as demand builds.

Given the charts and the action we have seen, we are raising our target for the next leg of the gold bull market to 1250+ in US dollars if we break up and out of this symmetrical consolidation pattern.

Let's see what happens.

Investors buy gold bars in record numbers
By Paul Farrow
2:27pm BST 22/07/2008
UK Telegraph

Volatile stock markets and a lack of confidence in the UK banking system has boosted demand for gold bars and coins from private investors to levels not seen for 25 years.

Tens of thousands of investors have rushed to buy gold from bullion dealers over the past year, during which the gold price has broken through the $1,000 barrier on occasions.

Tony Baird of Baird & Co, one the UK's biggest gold bullion dealers, said business was getting busier and busier – with punters investing £1,500 to £150,000 in gold bars and coins. Baird, who has been in the gold business for 40 years, claimed that demand was on a par with the late 1970s.

He added: "We have had queues in here. People are nervous of the stock markets and they are nervous of the banks. Northern Rock was a trigger and now Fannie Mae and Freddie Mac have stirred things up again this week."

BullionVault.com – the online marketplace for gold bullion bars – said that number of private individuals investing in gold has more than doubled over the past year. It now holds 3.5 tonnes of gold on behalf of UK investors compared to less than 1.5 tonnes a year ago.

BullionVault founder Paul Tustain said: "Gold is always a popular choice of investment when the economy slows."

It is not just physical gold that investors are chasing. People are buying Exchange Traded Funds that track the gold price.

ETF Securities saw record inflows on Tuesday with inflows of $265m. Gold ETCs recorded $225 million of trading on the London Stock Exchange (LSE) on the same day the LSE issued a report showing that gold ETCs took two of the top four spots in terms of trading volumes in June 2008 on the LSE’s ETC/ETF trading platform.

According to db Research, the independent research arm of Deutsche Bank the top three traded ETFs last month were all gold: Lyxor Gold Bullion Securities, ETFS Physical Gold ETF Securities Ltd and ZKB Gold.

Nik Bienkowski, chief operating officer at EFT Securities, said: "We are not surprised that commodities and more specifically gold ETCs continue to shatter records for trading volumes and inflows."