Category Archive: Gold Coins

Gold Analysis: Why is the price of gold rising?

Gold Analysis: Why is the price of gold rising?

As I write this article, the price of gold sits at £764.775, $1173.70 and €1028.524 respectively. The price of gold is at a three month, near four month high.

So what is it that is making the price of gold rise?

Firstly it has everything to do with the dollar and most importantly with the Federal Open Market Committee (FOMC). In truth I cannot remember a time I didn’t write an article mentioning the impending rates rise, only then to slam the FOMC for false hawkishness. Well this time it is no different. The FOMC minutes that came out last week are predominantly responsible for the yellow metal’s current boost. The minutes as before have continued to not ruffle feathers and the retreat from a September rates rise has not done much to instil investor confidence. The FOMC are still holding on to a potential December rates rise, but the reality is we are already half way through October and data is still not positive enough to warrant a rise. The Federal Bank no doubt will make noise to the contrary but myself along with most of the sane economic world, will see the crass imagination and over-exuberance in such a sentiment. The reality as specified in the minutes, is that this isn’t just about the US. It is about the global economy. More specifically China.

Price of gold rising: china

Why is the price of gold rising?


China if you hadn’t already realised is really the powerhouse, the engine room and pretty much everything else nowadays – unless of course you wish to believe exactly what US press will tell you. As the FOMC highlighted above, the global slowdown or more appropriately China’s slowdown has been alarming and has shaken the recovery process. I wrote a few months ago when the news broke about China’s slowdown that this won’t truly be felt until later on in the year. Well that time is now upon us. Chinese data despite optimistic forecasts is still falling short. Chinese Producer Price Index fell 5.9%, in line with expectations. This is the 43rd consecutive month. On the other side, Chinese Consumer Price Index rose 1.6% but was still short of 1.8% expectation. The massive economy that is China has experienced such increases since the huge growth in 2007 that it is now much harder for a larger economy to produce the 14% we were used to.

Lastly, War is another big reason for the price of gold to rise. Needless to say the increased pressure on Syria over the last couple of months has helped commodity prices to rise. Whenever there are times of uncertainty, commodities always tend to act as a safe haven. Likewise it is unsurprising that in the last quarter oil prices have remained fairly stable and in the case of Brent Oil, increased. The cost of extraction and then transport of metals will increase and should have a knock on affect going forward.

Verdict:- Why is the price of gold rising? Reality is, the world economy is not where the Federal Reserve or China want it to be. The wishful thinking for December rates rise is simply that, wishful thinking. With strong Chinese data elusive and US data still not making par an interest rates rise shouldn’t even be on the radar until well into 2016. I haven’t got onto the UK and -0.1% inflation rate figure – hardly encouraging for one of the EU’s strongest members and I scarcely need to mention it but the war on Syria has escalated. Uh-oh the Russians are coming..

Article by Michael Cooper
email:-Michael Cooper

 

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Default: So what now for Greece?

Default: What now for Greece?

Yesterday at 22:00 (GMT) Greece officially defaulted after failing to pay €1.5bn (£1.1bn, $1.7bn) to the IMF.

This came after a frantic and late request to extend the bailout, which was subsequently refused. Unsurprisingly Greece are the first country to fail to repay the IMF, meaning they are now technically in default. Default being the failure to repay a loan at an agreed and specified time.

So what next for Greece?

Default for Greece has been on the cards for a while now, but what does this mean for Greece and Europe? Here are the key dates to watch out for:

1st July – ECB officials will meet to discuss granting Greece an emergency loan package.

5th July – Greek Referendum on the Creditor’s proposals will take place.

10th July – Payment of Short Term Treasury Bills due (€2bn)

20th July – Payment of ECB Loan (€3.5bn): comprised of bonds held by the ECB & the national central banks from 2012.

Out of the dates above, the most important date to look out for will be Sunday’s referendum. The Greek populace will be asked to approve or reject the creditor’s most recent terms laid out in it’s deal:

Greek Default: Vote Sunday

Greek Referendum on Sunday

“Should the agreement plan submitted by the European Commission, European Central Bank and the International Monetary Fund to the June 25 eurogroup and consisting of two parts, which form their single proposal, be accepted? The first document is titled ‘Reforms for the completion of the Current Program and Beyond’ and the second ‘Preliminary Debt Sustainability Analysis’.
“Not approved/NO
“Approved/YES”

I think you’ll agree, for anyone who hasn’t got a degree in Economics or a strong grasp on the Greek Debt crisis, the lay person is going to have a job to know what that is asking of them. The BBC have an excellent article on this: “The Greek referendum question makes (almost) no sense”. For an explanation on the Greek Crisis and default, view our article: Greek Debt Crisis Explained: Top 5 things to know and key dates.

Verdict:-Sunday’s vote will determine what will happen to Greece. If they vote no, Greece will almost certainly be heading for the Grexit. If they vote yes, it wouldn’t be unsurprising to see the Greek Government do a U-Turn and a lot of the faces (Tsipras & Varoufakis) currently in the Greek Government will be ousted. Greece, as they have been for much of this year and last year, are at the centre of European economics. Roll on Sunday.

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Article by Michael Cooper

email:-michaelc@atsbullion.com

 

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