Once more unto the breach my friend, once more. Another week and finally I have some news to discuss. It has I admit been a while since I have written. My New Year’s resolution is well and truly broken.
This week we have seen Donald Trump lambasted in the American media for not taking a harder line on Russia. The Republican Senator Bob Corker stated that “the dam has broken“. Whilst the word of treason was floated, it will yet to be seen whether this will have a marked affect. The New York Times have written a great piece this week on the waywardness of the Republican party, which is well worth reading – ‘The Dam Has Broken. But For How Long?’.
What can be said, it is one of the first times we have seen significant Republican figures come out and take jabs at Trump. Paul Ryan, House Speaker, was one such figure to voice his opinion, “The president must appreciate that Russia is not our ally”. Whilst not directly speaking about Trump, he is providing a countering opinion with the gravitas of his position as Speaker. What was amusing was immediately after making his statement, he was asked whether he was condemning Trump, which he pirouetted away from. The cynic in me can only see that Ryan is trying to show his strength of character in effect offering a clear subtle difference from Trump. He has to be mindful however, that Trump still has a large portion of the Republican electorate. If you would like to read Ryan’s address, you can view that here – Speaker, Paul Ryan’s Statement On Russia.
From the fall out from Helsinki we need to turn to another world leader, Theresa May. There seems to be no let up for her and her leadership. Very rarely in politics do I ever feel a tinge of sadness for a politician, but reading news and watching Mrs May in the commons, I feel it. It’s like watching that favourite pet slowly dwindle, family members giving all-too-knowing glances at each other. Anyway, enough of my article liberating my childhood repressed memories; Theresa May is facing an uphill struggle. The last two weeks, May has seen several resignations amid Brexit negotiations.
The death toll includes: David Davis (lead Brexit Negotiator), Boris Johnson (Foreign Secretary) & lesser known Steve Baker (Davis’ right hand man). Yesterday May’s government narrowly saw off a rebel amendment on the trade bill, securing a narrow 6 vote margin. May now has a busy week and will be eyeing the Parliamentary recess as the safe house with which to gather her resources and sure up her support. At this stage in the game, a no deal Brexit is becoming a genuine reality. One can only hope that political differences and point scoring can be put on the backbench (pun intended) and the focus to be on securing the future of the United Kingdom.
Precious Metal Market – Stagnant
After yet another flat few months of trading in the precious metal market – I take up the mantle of writing another article. It will be yet another stat feast, albeit one showing pretty much the hypotenuse that the range has been fine. I will make a brief comparison to the figures in the previous article, which covered the gold and silver price from January to February. My belief is that the figures are not vastly different.
Before delving straight into numbers, I know you are chomping at the bit, I thought I would start with what has happened this month. Usually I do it the other way round, but perhaps we ought to look at the wider news that has happened. (I’m mainly doing this as the gold price and it’s lack of movement this year has begun to make my eyes hurt and I actually do want to get you through the article. I’m definitely doing this for your benefit. Not mine).
So over the last couple of months we have had numerous events, both financial and political. Let’s start with the UK-centric first:
Not much of a surprise, but March and April as will most of this year be, focused on Brexit. At the EU summit in March, it took the 27 EU leaders took just two minutes to approve the Brexit transition period and guidelines for negotiations on it’s future relationship with the U.K.
In the EU, the European Central Bank (ECB) have confirmed to continue buying bonds. As before the ECB have signaled that bond buying could continue beyond the September cut off pint. In the ECB meeting on 26th April, it showed all the hallmarks of a let-us-not-run-before-we-can-walk mentality. Mario Draghi mentioned the word caution almost in every paragraph of his summary. The Euro responded immediately with a three month low against the dollar. Draghi did however say the EU slowdown was ‘temporary’, so much will be made from further data released this year.
Perhaps a little surprisingly, Donald Trump could be seen as something of a peacemaker. Not exactly what one would have guessed at the start of the
year. However in March, North and South Korean leaders declared to end the long term war and commit to a denuclearisation of the peninsula. Whilst I can’t say I enjoyed watching the two leaders holding hands, in what can only be described as one of the most hideously stage-managed attempts at re-conciliation ever recorded. I did also thoroughly enjoy watching the bodyguards running alongside the car – I can’t wait until someone on Youtube has put music to that. Fundamentally however awkward it was to watch, it is at least a break through. Whether it continues is another matter and one has to wonder at what has been promised to North Korea to relation to thaw dramatically. Regardless, Trump rather remarkably has seemed to be instrumental. I will be keenly watching the meeting between Trump and Kim Jong Un scheduled on the 12th June. The meeting of two great minds.
So with the above in mind how has that effected the precious metal market. Here are the key facts and figures for gold and silver – its a quick snapshot and I’ll give a brief analysis afterwards:
|LBMA AM Gold Fix (1st Mar)||LBMA Gold Fix (1st May)||Change +/-||Percentage Change|
|Median Currency Exchange (1st Mar)|| Median Currency Exchange (1st May)
||Change +/-||Percentage Change|
|GBP to USD = 1.3753
GBP to EUR = 1.1258
| GBP to USD = 1.3622
GBP to EUR = 1.1336
|Silver Fix (1st Mar)||Silver Fix (1st May)||Change +/-||Percentage Change|
When I look at those figures, I think it is fair to conclude that the precious metal market has been quite staid. It isn’t so much that precious metals haven’t moved as the range in which the metals have traded is a little more interesting than a straight comparison between a small selection of numbers. But the point I am trying to get across is how little the market has moved. I think a lot of that comes down to the following – gold is used as a hedge and as things get better, the market normalises. Well that has begun to happen but gold actually is staying quite resistant. It is not correcting back down and neither is it moving up? It sits still and waits. What is it waiting for?
Precious metal markets – your move..
Well done for reading this and not reading about the impending snow blizzard. I am deeply impressed. Whilst I sit in my warm office sipping coffee and watching the layers of chiffon streams of snow fall outside, I realised it was time to pen yet another article (not literally pen). So far this year I haven’t written so much. I used to make certain that barely a month would go by and I’d have another article primed. Well I’m lazy and already broken my new years resolution of persistent article writing. I’m sorry.
So what has happened this year with the precious metal market? Here are the key facts and figures for gold and silver – its a quick snapshot and I’ll give a brief analysis afterwards:
|First LBMA Gold Fix of the Year (2nd Jan)||Today’s LBMA Gold Fix||Change +/-||Percentage Change|
|Median Currency Exchange (2nd Jan)||Today’s Currency Exchange||Change +/-||Percentage Change|
|GBP to USD = 1.3591
GBP to EUR = 1.1272
| GBP to USD = 1.3929
GBP to EUR = 1.1326
|First Silver Fix of the Year||Today’s Silver Fix||Change +/-||Percentage Change|
Overall the gold price has been quite static. The range over this period in sterling has been £41.75 or about 4% movement. Over the last week this has dropped to a range of just £8.78 or 0.92% movement. The price usually in January is quite resilient. In the last few years, the trend in January has tended to see a slight uplift from the December trading, which is then supported by the Chinese New Year purchasing. However December 2017 this didn’t follow this trend, as the price moved lower in late November/early December and then rebounded towards late December. From the end of December 2017 to now the price is almost exactly the same.
So why has the gold price not moved?
Well the numbers point to only a couple of reasons. I will touch on the main ones and briefly flirt with the others.
First and foremost, we turn our attention to the US interest rate rise to 1.5% in December by Janet Yellen, her last act as head of the Federal Open Market Committee. The increase in interest rate is going to have an interesting affect on global economy and commodities. With each rise and the return to normalcy for interest rates, we are going to see greater movement in currency. Likewise as the UK receives an interest rates rise of its own, the strength of sterling will impact the UK gold price, likely with some moderate downward pressure. There is a caveat with this. The reliance on cheap equities after the fall out of the recession and the fund managers hunting to attain growth from the stock market, is likely to play out over the course of this year. As interest rates rise and the restructuring of assets by fund managers, returning percentages of funds to safer assets with higher interest yields, will likely result in a stock market correction.
With that said, so far this year we are still seeing strong performance in equities, I guess much of it will play out as our attentions refocus on Brexit and the ongoing negotiations. I would imagine the closer we get to leaving and depending on the news, this will alter greatly how the UK economy, sterling and therefore how the gold price will do. Furthermore with regard to the Bank of England, rates rises are not too far down the line and no doubt we shall see sterling strengthen this year. It just depends how hampered it will be by the aforementioned Brexit.
Last but not least, I haven’t even mentioned the impending nuclear war with North Korea! Again gold will be at the mercy of Donald Trump’s twitter feed, so we will have to wait and see. The winter Olympics seems to have softened relations, but for how long for. The other aspect I also haven’t touched on as of yet, is China. Commodity prices are driven by the enormous manufacturing powerhouse that is China. China grew 6.9% in 2017 according to Chinese stats and is set to grow 6.5% in 2018. If this is to be the case, manufacturing growth will have a positive result for commodities, it will just depend on how that manifests itself and how manipulated the Chinese figures are. I can feel you roll your eyes – surely that doesn’t happen!
I almost forgot:Happy Year of the Dog to all! – except that dog isn’t actually a dog at all, we’ve just told everyone it is. It’s actually a lovely little kitten. Last year was the year of fake news, what will this year be?
That’s all for now.
*Please note we are not financial advisers. Ideas and opinions expressed in this article are the authors own. Please seek independent financial advice before investing in precious metals as prices can go up and down.
A client this week asked me “Where Does Gold Come From?” – I comprehensively know the answer and yet, I found myself blustering through it. I got to a point in the conversation where I managed to start answering the question “How is Gold Formed?” and I began to falter. I started spewing spurious facts about stars and astral dust. So to answer my client and to all of you wanting to know – here is a one stop shop. So where does gold come from and can let us answer how gold is formed?
Where Does Gold Come From?
As with all things in existence, there has been a series of generational evolution. Much of the universe, in its expansion and in its creation of elements that we recognise, has been formed by stars that eventually die in a huge collision called a supernova. Over billions of years, this continual creation and explosion of generations of stars has eventually led to the creation of pretty much everything in our comprehension.
A supernova, the final part of star’s existence, is an almighty explosion. This explosion propels an abundance of dust into the atmosphere, rich in atomic elements. This process known as nucleosynthesis created an abundance of elements during the cycle. Elements such as magnesium but also some of the heavier elements like iron. It is also from the process of nuceleosynthesis that gold comes from. Although the initial knitting of nucleosynthesis doesn’t produce gold immediately, it is thought that the presence of gold and other precious metals is present in the interstellar. This dust is rich with elements and as new stars are created through the recycling process, gold is present.
How is Gold Formed?
So after gold has been created or is certainly present in the interstellar, how does it come into being? Let’s look at how gold is formed on Earth.
During our system’s formation, the dust spewed out from generations of supernovae, begins to condense.
Gold at this point is molten, along with the Earth. This means that gold is awash with the other elements and due to it being a heavy element, it sinks into the core along with the other heavy metals. Much of the intrinsic gold present in Earth at the beginning, resides within the Earth’s core.
Almost all of the gold we are familiar with today, came into being whilst the earth cooled. Gold formed within the Earth’s crust, resulted from a lunar cataclysm – or the late heavy bombardment of asteroids and meteor showers. This is strongly supported by the Vredefort crater in South Africa – a crater over 2 billion years old and rich in heavy elements such as gold. With the earth’s crust cooled, gold is found in ores and deposits. It will be sometime, but eventually humans will discover, harvest and process gold into jewellery, coins and early religious artefacts.
So where does gold come from and how is gold formed? Through a process of astral recycling over billions of years. Each of these elements are created from the conclusion of stars that have gone before it. Through much transfiguration, gold settled into the earth’s crust and will be discovered by us approximately in the 4th millennium. It will be given Au as the chemical symbol for Gold, which was taken from the latin word Aurum – derived from the word Aurora meaning Dawn.
Gold is certainly bright like the dawn and I suppose with each generation of supernovae, a new dawn and new elements are created – with gold being allusive but always present.
With the introduction of a new One Ounce Gold Queen’s Beast Unicorn 2018, I thought it prudent to write a brief history about the Monarch’s heraldic beasts and an overview of the Royal Mint’s One Ounce Gold series. The Royal Mint plan to mint a set of ten coins over the coming years, with two designs minted in a singular year. In gold, the coin is produced as a one ounce, 1/2 ounce, 1/4 ounce and a 1/10th ounce denomination. The coins will also be produced as a two ounce silver coin, although some 10oz silver coins are also likely to be produced.
History of the Queen’s Beast
The Queen’s Beasts are ten heraldic beasts that were present at Queen Elizabeth’s coronation in 1953. Each of the beasts represents an element of the Queen’s genealogy. The use of the heraldic beasts actually derive it’s history from Henry VIII’s era and were originally known as the “King’s Beasts”. For the coronation in 1953, the Henry VIII’s beasts were revived from their 400 year origins and displayed aloft outside Westminster Abbey. The beast designs used in 1953, were commissioned by the British Ministry of Works and were created by Sculptor, James Woodford.
Queen’s Beast – The Heraldic List with Release Dates
It has been a while since we last spoke about this, but Interest Rates are firmly back on the radar. Hurrah, I hear some of you cry, whilst others ponder about what that means for their mortgage. Well like it or not, it is inevitable at some point.
Interest Rates At Present
So whilst the Federal Bank in the US have had four rates rises: the first in Dec 2015 (0.25% – 0.50%), the second in Dec 2016 (0.50% – 0.75%), the third in March 2017 (0.75% – 1.00%) and finally the fourth occurring in June 2017 (1.00% – 1.25%). Here in the UK we are yet to have an interest rates rise and so far have only had an interest rate decrease from 0.50% to 0.25% in August Last year.
Where are Interest Rates Heading?
The likelihood for an interest rates rise is dependent on a couple of factors, mainly on Inflation and the US Labor market.
The Federal Bank Reserve have expressed a desire to raise interest rates in the short to medium term. Whilst the FED’s James Bullard, a non-voting member of the FED, said in his address on Wednesday that there was no need to raise interest rates anytime soon; Chairwoman Janet Yellen warned in a speech to the National Association for Business Economics “We should also be wary of moving too gradually”.
With now just four of the twenty FOMC members voting to hold on interest rates, the markets have begun to price in a rates rise for December with a predicted 70% chance of that happening.
This week as the Bank of England celebrated its 20th year anniversary of independence, Mark Carney, the Governor of the Bank of England (BOE), has said in an interview that “in the relatively near term we can expect that interest rates will increase”. The next available date for an interest rates rise would be when the MPC meets on the 2nd November.
The reasoning behind a Bank of England rates rise are down to two factors. As Anthony Haldane, Chief Economist for the BOE pointed out this week, the UK economy is showing signs of healing. The UK’s current CPI (Consumer Price Index) is now sitting at 2.9%, as this has seen a steady increase, the Bank have intimated that an increase in the interest rate, will give a boost to the pound. For the BOE it is a fine balancing act but with an economy showing signs of inflation and with wages showing a more positive outlook, it is in a stronger position to return to normalcy.
Gold Price Rockets
Before I begin this article – I have to immediately apologise for the title. Yes you guessed it, I am indeed referencing North Korea. It is in truth a bad joke – not North Korea but my use of the word rockets. Over the last couple of weeks we have seen a significant rise in the gold price. As I sit and write this article, the price of gold is up by $12. So what has happened to the gold price and why is it up?
Gold Price Stats
The gold price currently sits at £1034.52 / $1338.85 / €1126.45 respectively. Exactly three weeks ago today the London Bullion Markets Association morning gold fix (LBMA) was £987.34 / $1281.10 / €1085.48. That is an increase of +4.77% in GBP / +4.51% in USD / +3.77% in EUR.
If we compare this information with how Sterling (GBP) was performing against USD and EUR it will give us a better focus of what has occurred in the market.
At present GBP sits at 1 GBP:1.29442 to USD and 1 GBP:1.08850 to EUR. Three weeks ago today GBP sat at 1 GBP:1.29774 and 1 GBP:1.10106 to EUR. In the three weeks sterling has depreciated virtually nothing against USD (about 0.00751% – I almost omitted this from the article but thought it would be fun to include it!) and -1.14% against the EUR in three weeks. The real winner over the last couple of weeks has been the Euro with gains against most major currencies.
So the information above points more towards a slim support in the gold price from the USD weakning. As is the case sometimes, currency movements can be the cause and are usually a marker that I would use to see how gold is trading but actually, the gold price hasn’t generally been much affected by that. The Dollar has lost ground against the Euro, of approximately -0.89%, but that would have had limited effect on the gold price.
So then why has the gold price risen over 4% in three weeks?
Gold Price Analysis
In essence it is down to really a handful of reasons, one of which I alluded to at the start. But you may also be surprised to see what else has left an impression on the gold price:
Firstly and probably at the lowest end of the scale, we are just coming out of Summer. Traditionally when you study the output of trading across the end of July and August period, trading is down as many people are on holiday. That does believe it or not have some bearing on the price, not a lot of course but it has to be considered.
Secondly, President Donald Trump’s decision to go ahead with the Mexican Wall by granting four provisional contracts helped to spike the gold price. For many analysts this endeavour seemed unlikely to ever come to fruition but as is the case with Mr Trump, never underestimate him and expect the unexpected (I’m very close to start quoting Leslie Nielsen lines).
Thirdly, we have also been expecting two natural disasters to hit over the last couple of weeks. In the US, Hurricane Harvey landed in Texas and has caused significant damage across the state and neighbouring Louisiana. Also in India, Nepal and Bangladesh we have seen immense flooding following an ongoing monsoon that has displaced hundreds of thousands of people and according to the UN it is estimated to have effected almost 40 million. It has been described as one of the worst humanitarian crisis to affect the region in years.
Lastly and with no real surprise the gold price has risen because of (drum roll please) North Korea. The heightening of tension and pressure in Asia is becoming quite alarming. Firstly, you have had an increase in rhetoric over the last couple of weeks between the US and North Korea with president Trump stoking the fires. This has largely been whipped up due to the missile that bypassed Japan a week ago and this weekend’s alleged successful hydrogen bomb test by North Korea. Comments made this weekend by President Trump regarding North Korea were never going to be anything but inflammatory. The President tweeted that North Korean actions were “Hostile and Dangerous” he also wrote “North Korea is a rogue nation” and in another tweet he suggested that North Korea will only understand negotiation on one level, meaning a show of arms. Over the weekend Mr Trump also stated that any countries trading with North Korea, the US will not do business with which was more or less a direct provocation aimed at China. This is thought to have serious implications with relations over the coming weeks.
In all, the gold price as it has always been, is acting as a safeguard. As crises after crises loom, the metal is going to stay heavily supported and I cannot see how the North Korea issue is going to play out. Do I need to start work on that bunker yet? Probably. Where’s my shovel…
How and Where Do I sell Gold? – Our Top Tips
“How do I sell my gold? Where can I sell gold? I have gold chains, gold coins and a small gold ingot but how do I sell it?”. These are the types of questions we get asked the most. We all have those gold items that we inherited or bought all those years ago and now they sit in a drawer. So how do you sell gold and what should you look out for.
Where to sell gold?
Firstly, sell the item to the right place. Typically if you have coins, bars or bullion grade items, you want to sell those to a Bullion Dealer. Bullion dealers such as ourselves make money on volume and will usually offer better prices on gold coins or gold bars. This is mainly because a bullion or coin dealer is looking to resell that item back out to customers. Therefore they are more likely to offer a closer spread to the spot price to secure getting the coin or bar, with an eye on reselling it soon after.
What if I want to sell gold Jewellery?
With jewellery and scrap gold I always recommend customers to do as much of the work as possible. If you are going to be selling gold, do your homework. I would start by having a look for any hallmarks. Usually on jewellery the hallmark will be either near the clasp of the necklace or bracelet on the underside of the mount. Sometimes this is hard to find but do persevere. So what is it you are looking for?
Below are the hallmarks you need to look for:
Sometimes no matter how hard you look you still can’t find the hallmark. Or more often than not, especially with old items of gold jewellery, it is impossible to make out what the hallmark is. If that is the case, you can still give yourself a rough idea of the value.
How to work out the value of the gold you want to sell?
So hopefully you have found the hallmark. Even if you haven’t I am going to take you through how to at least give yourself a rough idea. This isn’t full proof and is only meant to be indicative. The bullion dealer is always going to need to see the items – but at least you will have an idea.
Firstly – weigh the item – you can use kitchen scales, simply take down the gram weight. Remember, this won’t be 100% accurate but it will give you a reasonable idea. Please do be aware that if your jewellery has stones or pearls in it, that will effect the weight.
Secondly – calculate the price – so you have the weight in grams, what next?
Well on our site you will find the spot price of gold in troy ounces (31.1035g) and the gram weight. The spot price is 24 carat or 999 fine. What you will need to do is calculate price by the purity of the item.
I have a necklace. I’ve found the hallmark and it says 750 so it is 18 carat. The necklace weighs 10 grams. The current gold price on the website is £900, this is a gram price of £28.93. The £28.93 is the 999 or 24 carat. To find out the 750 or 18 carat gram price, I multiply the 24 carat gram price by 0.75.
So 28.93 x 0.75 = £21.69
The 18ct gram price is £21.69. I then multiply this by the weight of my necklace.
21.69 x 10 = 216.90
We can see from this that my 18 carat 10 gram necklace approximately is valued at £216.90. A dealer or jeweller would then take a premium on this. This is how we would make our money and factors in the refining cost etc. Usually a dealer or refiner will take anywhere between 95% – 85% of the value depending. On that basis £219.60 x 0.90% = £197.64 is the likely value you are going to receive.
As I said earlier this should be used as a guide only. It will still be dependent on an inspection of the item. Either way, by using that example you can work out 9 carat, 18 carat, 22 carat gold etc. At the very least, this should help you to sell gold with some knowledge. It shouldn’t be a mystic art!
Finally should I clean the gold coins and gold jewellery?
I always recommend to clients not to clean the coins or jewellery! Sometimes even the softest of cloths and most delicate of soaps can cause scratching or tarnishing. It is always better to leave any dirt or grime on a coin and bring it in as it is. We can then provide guidance when you are here. It is tempting when selling something to spruce it up. As a dealer there is really no need, we aren’t going to be overly fussy. We will give the coin or item an inspection.
We hope this goes some way in helping you to sell your gold with confidence. If you get stuck or don’t understand, you can always ring a dealer. We are more than happy to help and can advise you on the best way to sell gold.
Finally, a news article, I hear you cry. It has been some considerable time since my last blog/article post. So where have I been? Well in truth, nowhere; certainly nowhere exciting and I don’t have an excuse for why I haven’t published anything about gold for a while. If I can be candid, here at ATS Bullion we have been quite busy. The increase in sales from last year have continued and have not really abated. I’ve been under the cosh, as have been the incredible ATS Bullion Team. I now feel it is my duty to say a congratulations to them. Anyway, aside from that, I had been getting a little tired of writing about gold and its relationship with Brexit and the dollar. So I felt a little hiatus was in order to allow me re-sharpen my stylo. Nevertheless, enough of the preamble, let me start this service game with a brief analysis of the gold market this year. (I apologise for any of the tennis quips in this article – it is Wimbledon season).
ATS Bullion: Gold Analysis for the Year to Date
Gold opened this year on the 3rd January according to the London Bullion Market Association‘s (LBMA) Fix at: £932.120 / $1148.65 / €1103.28 respectively. This morning the LBMA AM Gold Fix was: £940.540 / $1218.95 / €1067.920. This is a difference of + £8.42 / + $70.30 / – €35.36.
The gold price, unlike in other critiques I’ve published has a really interesting split between the three currencies, which I haven’t seen for a quite a while.
Let’s now have a quick look at the currency exchange – see the below chart:
|Currency||Opened 02/01/17||At Present 14/07/17||Change (+/-)|
From both sets of data there is quite an easy answer to attribute to them. In the first instance you can see the relationship between commodities and currency. The dollar has lost a bit of ground this year against both sterling and the euro. This change has of course given way to a moderate increase in the dollar price of gold. Likewise we can see the biggest loser in gold this year has been in euros.
In percentage terms, sterling against the dollar has increased + 5.8% whilst the gold price in sterling has changed a negligible +0.90%. Whilst the dollar has slipped against GBP – 5.8%, the gold price in dollars has changed by + 6.12%. Furthermore, looking at our European cousins, the year of voting has almost abated and since the appointment of President Macron and the defeat of Geert Wilders, the Euro has settled. It has posted a + 9.42% increase against the dollar and gold in Euros has fallen – 3.2%. The European investors haven’t quite left the safety of gold and no doubt much attention will turn to the German vote later on this year.
The relationship between the sets of stats really only again point to the same circumstance. The reality is that the US economy has begun to lose a little bit of ground. Hardly surprising news considering sterling had 30 year lows last year after Brexit. It was never going to last forever at those lows, however much will be made of the negotiations as they are on-going.
Well, that has been a long time coming. I feel refreshed. It is nice to be writing again for ATS Bullion- thankfully I didn’t put many terrible tennis puns in the article. You’re welcome.
Well I think it is probably safe to start this article by saying, thank goodness 2016 is over! That was quite the year. We had the tumultuous events of Brexit, the rise of soon-to-be President Donald Trump, another Star Wars was released (I’m making no parallels between the Rise of Darth Vader and aforementioned Mr President) and a whole host of celebrity deaths. It left us all quite tuckered out by the end of the year. It seemed to be a never-ending feast of news with everyday bringing something else. Thank god that is over. So what has happened to the gold price and what is the gold forecast for what’s happening in 2017.
What did we learn from 2016
The first Gold Fix of 2016 was on the 4th January at £725.019, $1072.70, €982.299 respectively, with the final fix of the year published at £942.580, $1159.10, €1098.360. The Gold Price across the year moved £217.561 (+30%), $86.4 (+8.05%), €116.061 (+11.81%). The gold range in sterling was £335.06, in dollars it was $297.30 and in euros €257.414. The dollar and euro price is fairly consistent with a difference of 27% and 26% of fluctuation, whilst in sterling it is a whopping 46% movement – which is a tremendous amount of swing.
Without being Milton Friedman, it is fairly easy to point towards currency as being one of the destabilising factors for the gold price in 2016. For Sterling of course this is down to Brexit, I don’t think we need to look much further than that. But for the sake of all of you wanting more stats: the sterling price against the dollar started the year at 1.46 and ended at 1.23 – a loss of 18.69% which was well documented as a 31 year low. The combination of Brexit and FED rates rises put a lot of downward pressure on Sterling. The gold price benefited and performed very well throughout the year with it being listed as the best performing asset class after the first quarter. The gold price continued riding the uplift until just after the presidential election and has since had a moderate retraction.
Gold Forecast 2017: The Year Ahead
In the past I’ve written a huge block of my predictions for the year ahead. After reviewing my last years auguries; I must confess I was reasonably pleased with it – I’m going to write it slightly differently this year. Stay with it.
Before we look any further, we have to be looking at America. Trump’s election victory has so far been taken as fairly positive in the markets, with the indices posting strong results. Trump’s business background and promises of de-regulation in the banking industry and the repatriation of offshore cash, seemingly are buoying investor confidence. Ford have already taken heed and scrapped their plan for a $1.6 billion dollar manufacturing plant to be built outside the US (across the border in Mexico). The markets at least have so far been in favour of his appointment.
The other aspect of the US we have to look out for is the Federal Bank raising interest rates. The FED have expressed a desire to continue to raise rates in 2017 with three rates rises being touted. Janet Yellen stated the rates rise were a “reflection of the confidence we have in the progress the economy has made and our judgment that that progress will continue”. Naturally as we have the incremental interest rates rise, we will see a retraction in the equities markets as investors begin to shift monies back to high interest cash accounts. In all, a lot of this economic year is going to sit on how the Trump Presidency is going to pan out. Optimism may well give way to a year of underwhelming events, but if one thing is for sure, Trump at the very least talks first and thinks later – a recipe for unpredictability.
Over the last year, I almost began to forget that China existed. With all the headlines being dominated by Brexit and then subsequently Trump, I can’t actually remember anything about China from the last year. The bubble associated with China, although thought to be about to burst last year, didn’t. China grew approximately between 6-6.5% depending on what statistics you read. That was primarily due to the commodity drive last year. An economy strongly reliant on commodities saw Chinese manufacturing recovering from a four year deflation helped by a slight fall in the Yuan. The constant strengthening of the dollar comes with its benefits but also with its negatives.
This year I think we need to focus attention a bit more on China and watch out for that bubble. With China seeking to obtain another year of 6.5% growth, at some point they will come unstuck. They have a huge increase in the middle class and over the last couple of years a shift towards a more service based economy to help head off any seismic problems with manufacturing. These factors combined with any slow-down in commodities, China’s ever growing debt, it will come to a head – the question is when. With the Chinese, it is likely they’ll more likely hit stagnation than a complete collapse. It is a machine well-oiled and the leadership know how to control it sufficiently. It will be the BRIC countries such as Brazil and India who will be more greatly effected.
UK and Brexit
Sadly for you the reader and me the writer, Brexit is going to dominate our headlines for a while (I pretty much refused to write anymore about Brexit last year). As of writing this we are allegedly set to be triggering article 50 in March this year with us potentially leaving in 2019. Let me put this supposition to you: – with the resignation of Sir Ivan Rogers, deemed one of the UK’s most experienced EU ambassadors, with Rogers himself calling the line of argument put forward to him as “muddled”, it doesn’t bode well. The government have now appointed Sir Tim Barrow, a well-seasoned negotiator, it only makes me feel things are going to get entrenched. I happen to echo Sir Ivan Rogers’ belief that our exit is going to be a long drawn out affair. I think this will have an effect on sterling. A failure to trigger article 50 will send the wrong messages to the markets and will probably delay an interest rates rise in the UK. If they do trigger it, it will likely settle currency down but it won’t last if negotiations stall in the mid to long term. Any hesitation will cause a currency wobble and we will hear the same sort of fear-mongering about companies relocating – which may well happen if we flounder.
Gold Forecast 2017
So as you can probably tell, there are a hell of a lot of variables that will play on the gold price in 2017. Last year it was fairly easy to predict that the dollar would strengthen. This year it isn’t at all clear cut. On the face of it, the dollar looks to have another strong year, this will put downward pressure on the price. Sterling will be dependent on negotiations with the EU and whether the Bank of England will raise interest rates, which they will likely have to do at least once in 2017. This may mean a resistant gold price in sterling. Ultimately, I think the gold price will have some significant pressure but it isn’t going to take much for an uplift in the price. Given the lack of belief in the financial institutions, the Brexit Saga and the new President, I think 2017 is going to be a tinderbox – let’s hope Mr President doesn’t bring that torch.
Thanks for reading this year’s gold forecast! Remember this article is to be used as an article and should not be used as investment advice. Please seek professional investment advice before investing.