Gold: Who Wants To Buy And To Sell

About: SPDR Gold Trust ETF (GLD), Includes: IAU, SGOL, SLV
by: Fred Piard

In a previous article about Gold and Google (NASDAQ:GOOG), I have shown the correlation between search volume peaks and corrections in gold and silver price (ETFs: GLD, SLV). If you want more details click here.
In this article I would like to show how Google Trends gives us information on the geographic location of investors who are thinking of buying and selling gold.
Here is a summary of the countries where the highest search volume was generated from 2006 to 2012 (year-to-date) for the 3 keywords: "gold price", "buy gold", "sell gold".

Keyword "gold price":

(the highest search volume is ranked first)

2006 2007 2008 2009 2010 2011 2012
Vietnam Hong Kong India India UAE Qatar Sri Lanka
Hong Kong Singapore Singapore Hong Kong Singapore India Singapore
India India Hong Kong Singapore Hong Kong Singapore India
Singapore Vietnam Malaysia Malaysia Malaysia Malaysia Malaysia
Iran South Africa Vietnam Saudi Arabia Australia Pakistan Pakistan
South Africa Malaysia South Africa Australia Canada Hong Kong Kuwait
Australia Australia Australia USA USA Saudi Arabia Saudi Arabia
Malaysia New Zealand Saudi Arabia New Zealand Thailand USA Iran
New Zealand Indonesia USA Canada Egypt Canada Hong Kong

The United Arab Emirates (NASDAQ:UAE) have been at the first place since 2006 with an exception in 2010.

Keyword "buy gold":

(the highest search volume is ranked first)



2006 2007 2008 2009 2010 2011 2012
Norway USA USA Singapore Singapore Singapore Singapore
USA Australia Singapore USA Australia USA USA
Denmark Denmark Australia Australia USA UAE Australia
Sweden Canada Canada India India Australia UAE
Australia UK India Canada Canada Ireland Canada
Canada Sweden New Zealand UK UK India India
UK India UK Germany Sweden UK Ireland
India Netherlands Ireland   Germany Canada UK
Spain France Sweden     New Zealand New Zealand
France Germany Germany     Malaysia Malaysia

Singapore has been at the first place for 3 years and a half.

Keyword "sell gold":

(the highest search volume is ranked first)

2006 2007 2008 2009 2010 2011 2012
Canada Canada Canada UK UK UK UK
UK Australia UK Canada Canada Canada Singapore
  UK Australia Australia Australia Australia Canada
    India India India India Australia

The United States have been at the first place since 2006.

Before trying to draw hypotheses or conclusions, it is important to know the possible biases.

- Language bias: the keywords are in English. However, the financial language is English even for most individual investors worldwide. As an example the search volume about gold in English was 10 to 15 times the search volume in Spanish, although there are more native Spanish speakers in the world. So I think the language bias is not a problem: keywords in English are representative of the global interest about gold.

- Search Engine bias. This is a problem because of the absence of China, where Baidu (NASDAQ:BIDU) is the main search engine. Although Google's market share may differ from one country to another, my opinion is that this ranking is quite reliable, excluding China. Google's global share by query volume on the search engine market is evaluated at 68.1%, the 2nd place being for Baidu with 7.8% and the 3rd for Yahoo with 5.6%.

- Local culture bias. Google Trends statistics are based on search volume and not unique users. Countries where there's a supposed traditional addiction to gold (India, UAE) might be overrated.

- Learning bias. People have generally their usual sources of information in their favorites and don't use Google for that. So I think that the search volume is more representative of people whose interest in gold is relatively new or episodic.

- The central banks interest is not taken into account here. Big gold buyers like Russia, Mexico and again China are not ranked here.

The ranks tell stories about countries

The recent ranks of Singapore (population: 5,183,700) among the very first search volumes are a clue that a significant part of the financial activity has moved to this destination.
For Ireland (population: 6,380,661) it is a sign of distress. Gold has lost a little bit of its shine as a safe haven in 2011, but it's still much safer than a failed banking system, a struggling currency and a falling real estate market.
India is another story, a millennial one where tradition has made gold a wedding symbol and a life insurance.

The following table gives the result of the subtraction ["sell gold" rank - "buy gold" rank], when and where it is calculable. The higher it is, the more bullish the search volume.

Country 2006 2007 2008 2009 2010 2011 2012
UK -4 -1 -4 -4 -4 -5 -6
Canada -4 -2 -2 -2 -2 -5 -1
USA -1 0 0 -1 -2 -1 -1
India     0 1 1 -1 0
Australia     1 1 2 0 2
Singapore     >3 >4 >4 >4 2
UAE           >2 >2
Ireland           >0 >=0
Denmark   >1          

According to this indicator, the Southern Asia-Pacific region would be neutral to bullish and the Northern Atlantic region would be bearish. Please remember that China is unfortunately ignored here.

This data are interesting from a sociological and demographic point of view, but What can we get from that as investors?

It means that the countries of financially dominant marketplaces (USA / UK) have a bearish behavior when looking for information on gold. It has been so at least since 2006. In the same time the gold price has been multiplied by 3. My opinion is that as long as they continue to have this bearish behavior, I see no risk of bubble in gold. On the contrary, if the balance between bullish and bearish search volumes should change significantly in the USA and UK, I would take it as a warning that the bull market in gold could reach the end in the following months. But there's no sign of change up to now.

If you want my recent graphical analysis of gold price (6/19/2012) it is here.

Disclosure: I am long CEF, GTU.

Additional disclosure: I was a certified Google Advertising Professional in 2007 but have always been independent of Google Inc.