(Kitco News) - Gold's unstoppable rally into uncharted territory is attracting significant attention as investment demand continues to grow. However, a new trend is also emerging, with physical demand also seeing robust activity.
Traditionally, higher prices have hurt physical demand, but the British Royal Mint reports a surge in new demand over the past month.
"From The Royal Mint's own data, in September, buying has outweighed selling by a ratio of 2 to 1 among investors, suggesting that many believe the yellow metal could rally further this year and beyond," said Stuart O'Reilly, Market Insights Manager at The Royal Mint, in a statement.
This strong activity comes as gold prices hit £2,000 an ounce, a new record high. O'Reilly noted that gold prices have risen more than 23% against the pound so far this year.
Gold's rally against the British pound mirrors its gains in the broader currency market. Currently, spot gold is trading at $2,666.50 an ounce, up 0.35% on the day. Gold' is up 29% against the US dollar year-to-date. Gold' prices have reached record highs against all major currencies, including the euro, Canadian dollar, Australian dollar, and Chinese yuan.
O'Reilly said investors are turning to physical gold as a hedge against increasing geopolitical and economic uncertainty. He also noted that, for UK investors, the Royal Mint's bullion coins are exempt from the government's Capital Gains Tax, making any price gains tax-free.
O'Reilly also highlighted another emerging trend for the precious metal: this unprecedented rally is attracting a wave of new investors to the marketplace.
"At The Royal Mint, we have seen how these all-time highs in gold markets have led to an increase in first-time precious metals investors entering the market. Over the last few years, The Royal Mint has introduced a range of new investment products, from small bars to fractional coins, enabling investors to buy precious metals in ways that suit their approach to investing," he said. "This is improving accessibility while democratizing precious metals investments for both first-time and existing investors."
The British Royal Mint is not alone in observing this trend. Joe Cavatoni, North American Market Strategist at the World Gold Council, said his team is also seeing strong investment demand for physical gold.
"We continue to see robust demand for gold in the investment category, which includes consumption in physical form. In many instances, investors are acquiring gold holdings through investments in physical gold," he said in a note to Kitco News. "As we've anticipated, the lower US interest rate environment is drawing investors back to the gold market. We expect both physical investment and financial products to remain viable investment vehicles for Western investors."
However, Cavatoni warned that one sector of the precious metals market could be impacted by higher prices.
"We expect to see continued weakening in demand for jewelry, and this has already been reflected in updated numbers," he said.
Beyond physical demand, investment demand is also improving. The world's largest gold-backed exchange-traded fund, SPDR Gold Shares (NYSE: GLD), has seen its holdings increase by more than 14 tonnes this month.
At the same time, net speculative positioning in gold futures remains at its highest level since February 2020.
