Futures & Commodities

BullionVault: Buyers flock to gold on the dip

Gold: 'People continue to buy on dips'
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Gold: 'People continue to buy on dips'

Despite precipitous drops in the price of gold since 1978, private investor sentiment towards the commodity remains strong, with buyers outnumbering sellers by two to one, according to BullionVault, the online gold and silver exchange.

Adrian Ash, who is head of research at BullionVault, said that users took advantage of the worst November for the dollar price of gold for 35 years and grew their holdings.

(Read more: Gold settles near five-month low on taper worries)

He told CNBC: "Our client base has continued to increase so there continues to be, and I think that's because of the lessons of the last five years, gold as an insurance policy; gold as something for private investors to look at as being a hedge."

BullionVault's Gold Investor Index is a sentiment indicator of the 50,000 people who use its gold and silver exchange online.

November concluded the strongest three-month run on its index since June, when the sharpest quarterly drop in prices since 1983 saw private investor interest surge in physical gold. Ash said that customers have bought back 60 percent of the gold sold off between April and June.

(Read more: China gold consumption set to cool in 2014)

India was until recently the biggest consumer of gold, but has been overtaken by China, according to the World Gold Council. Net gold imports to China remain strong, but Ash said that there was still an important lesson to learn from 2013, which has been a difficult year for the previous metal.

"A big lesson for 2013 for anyone involved in the gold market is that whilst Chinese demand has been phenomenal by any measure this year, it obviously hasn't outweighed the impact on prices of what's happened from Western real money allocations," Ash said.

(Read more: Gold suffers worst November since 1978)

Ash said that the end of quantitative easing (QE) was still a worry for what its effect on the gold price would be, and said that it was real interest rates that moved gold in the long term and that dollar strength was not what was hurting the gold price.

"We haven't seen the final outcome of what QE does yet and I don't think we've seen anything about what it does when it gets removed," he said. "Definitely though, it is about real interest rates. That's what really moves gold long term. If you're getting strong yield on U.S. Treasurys then obviously investment in gold is going to be less urgent for you."