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.
Investing in gold is a great way to diversify your portfolio while delivering a stable alternative to property and stock.
High demand means the investment remains secure long-term, and the value of physical gold is protected from inflation-induced fluctuation – nobody can predict the future price of gold but it is a traditional safeguard.
Once you understand why to invest in gold, it’s time to think about how. What are the next steps?
In this post, we’ll look at how to invest in gold – step-by-step.
Step 1 – Consider your purchase capacity
Investing in gold offers a great deal of flexibility, so the first step is to determine your purchase capacity. Whether you’re looking to invest hundreds or thousands, there are plenty of options.
For example, gold coins and sovereigns can vary from a couple hundred to several thousand pounds – so building up a collection can mean investing gradually over time. On the other hand, if you’re looking to make a larger one-off investment, you may get better value for money if you buy several bars at once.
The first step is therefore considering how much you’re looking to invest and over what time frame.
Step 2 – Find a reputable source
Legitimacy is key to making your investment in gold worthwhile. While it is illegal to reproduce coins, forgery is still a risk.
The threat of being conned with impure gold is present if you deal with the wrong source, so it genuinely pays to do your research. You should always buy from a reputable dealer who offer certificates of authenticity and connections with similarly reputable trade associations.
For example, the British Numismatic Trade Association have a strict code of ethics that members must adhere to when selling gold, ensuring purity is always as advertised and historical accuracy is thoroughly considered. The London Bullion Market Association is a reputable wholesale over-the-counter market for the trading of gold and silver, so look out for dealers who sell their ‘good delivery’ standard bars.
Step 3 – Coins, bars or jewellery?
You’ve decided how much you’re looking to invest and where to buy from, the next step is deciding the type of gold to invest in.
Coins, bars and jewellery are the three main options – although, if you’re looking at an investment in gold from a purely financial perspective, bear in mind that with jewellery, you’ll be paying a premium for craftsmanship, style but you will also have to VAT whereas investment gold has a VAT free status.
With bars, you can typically expect 24-carat purity, sealed and attractive packaging, and when buying larger sizes, the premium can be significantly lower than coins as the production costs are lower. It may also be possible to purchase some bars through your pension provider – However this is dependent on the pension provider themselves, if in any doubts check with them beforehand.
On the other hand, the benefits of investing in coins include:
1) Lower market risk as you can spread investment over longer periods
2) Collectible value; buying for gold price and numismatic value
3) Some date stamps mean coins can make great personal gifts
4) Abundance of aesthetic choice
5) Storage can be a lot easier
6) Some gold coins are Capital Gains Tax Free
As with any purchase, there are positives and negatives to consider; bullion bars can offer the highest value of gold for your budget, but coins provide potential collectability, pleasing aesthetics and historical significance.
Step 4 – Buy under current market value
As with any investment, the key is to buy low and sell high. When investing in gold, you can keep up with the latest prices through most daily newspapers, or shop around online for the latest value. Over the last quarter, the value of bullion has fluctuated from around 26,500 GBP/kg to 34,000 GBP/kg – so if it’s crucial to buy and sell when the time is right.
Alternatively, we’re happy to give you an idea of the current price over the phone – whether you’re buying or selling.
Step 5 – Ensure your delivery is insured and safe
Investing in gold brings an additional consideration to investing in the stock market – you need to be certain that the gold itself will remain safe and secure.
Even before it arrives, ensure that wherever you order from, your delivery is fully insured and your investment is protected. You’ll also need to consider how you will be safely storing your investment – will you also need to invest in a home safe or use a bank’s safety deposit box?
Although they are comparatively minor, insurance and security costs should be factored into your expenditure – but certainly worth every penny.
From considering the extent of your investment to the means by which you’ll store your bullion, these valuable steps will help you understand how to invest in gold.
There are a lot of considerations when planning a financial investment of any kind, so if you have any further questions about buying or selling gold, get in touch with our expert team today!
What made the gold price drop this week?
What I love about my job is knowing that in a blink of an eye, the gold price can completely change. Like all things if you are unprepared it can catch you completely off guard and as a bullion dealer you begin eating losses. On the flip-side the price can soar and everything we bought yesterday can suddenly be worth exponentially more. That I suppose is the fun of it. As my CEO always says to me, “we live and die by our decisions” and like most things in life that is fundamentally true. It is about being pragmatic and knowing when to turn a profit and not trying to play the market – that is when you can get caught and badly. As with gold’s volatility and most of life’s circumstances we are faced with, there is a chain of causation. Sometimes the action and result cannot be pinned down to one set of reasons. Unlike a legal arena where causation isn’t necessarily sufficient to create a legal liability, the gold price and most specifically being caught on the wrong side when price collapses, will goad you into thinking you should have known better and “why didn’t I wait to buy” but the reality is, to pin a cause to the result of a gold price drop is not always an easy judgement.
The Gold Price Drop Analysed
On Monday the LBMA AM Fix was £860.886/$1250.40/€1115.840 and yesterday’s PM Fix was £829.520/$1220.60/€1094.769 – in sterling that is a drop of 3.64% in four days. Currencies likewise GBP to USD opened on Monday at 1.4497 and closed yesterday at 1.4704 – in sterling a rise of 1.43%. Sterling is now sitting at it’s highest since early Jan this year.
Typically when sterling increases against the dollar, the gold price moves lower here due to the conversion from the gold price in dollars to the pound. The dollar price has been strengthening this year which I have mentioned previously in my 2016 Gold Forecast at the start of this year. Solidifying the dollar has been on the FED’s agenda from last year and inevitably it will continue. Despite this week where it has softened for sterling, USD against CNY (Chinese Yuan Renminbi) has strengthened considerably and is back up to the strength we saw in February. I wouldn’t be at all surprised if the March on Beijing/Hong Kong (economically) continues especially after announcements that the FED are looking for further interest rates rise – possibly in June.
Having said all that, a large Chinese ICBC Standard bank have just bought a vault in London from Barclays, that can hold up to 2,000 metric tons of gold, silver, platinum or palladium. Furthermore, the Chinese Central Bank are also heavily topping up their own reserves and will likely continue doing so. As has always been the case, gold is always part of the bigger picture, it may well lose skirmishes along the way but in the long term, the causation of currency volatility and recessionary cycles, will mean that gold as always will be the haven that investors and the prepared turn to.
Article by Michael Cooper
Brexit: What will happen to the Gold Price if the UK leave Europe?
Several years ago, I reluctantly remember I hasten to add, glumly staring down at a heavy EU Constitutional law book with an image of a faded blue Brussels and a rippling EU Flag. EU law was one of my least favourite lectures of my law degree. It was filled with pages of bureaucracy, everything minutely documented in giant statutes. The only moderately interesting aspect was in the first and second lecture to do with the evolution of the EU and subsequent aspects of Human Rights. Other than those pockets of interest, those four hours every Thursday for a year was eye-poppingly boring. It was probably one of the sole reasons I didn’t pursue a career in law. Despite this damning account of EU law that I’m certain every student-lawyer lives through at some point (if it’s not EU Law, it’ll be Equity and Trusts, or perhaps Land Law – the woes of a law student), I still haven’t quite picked a camp yet. With Brexit it really is a case of: Do we stay with the devil we know? Or do we take this opportunity and venture out alone? – I’m none the wiser.
What is Brexit and are we likely to leave?
On the 23rd June, we will be voting to stay in the EU or we will be voting to leave it. I haven’t looked at many polls but from speaking with clients and friends alike, it is rather split and it isn’t easy to tell who picks what. The FT have a Brexit poll running which currently has 46% Stay and 43% leave with a margin of undecided voters in the middle. Whatever the outcome is, the sentiment to the run up is going to be one of uncertainty. For Business leaders and those in management trying to plan ahead, uncertainty is a devil and contingency planning is going to be robust for Brexit.
What will happen to the Gold price?
As the Bank of England warned yesterday, an exit from the EU carries with it the likelihood of a recession. With the fear/jubilation of Brexit mounting as we get closer, it is likely the markets will respond according to the polls and sentiment. The sterling currency is likely to be weakened/strengthened depending on what the polls are reporting. My guess is the polls are only going to be move by two or three basis points in either direction. I don’t think there is going to be much science involved. With that in mind, the pound will probably weaken, something that has already begun to be factored in. If we leave the EU altogether, Sterling may well fall considerably.
In this event, the gold price in sterling will potentially go higher. Usually in this instance, when sterling falls against the dollar, the gold price moves up for us as the gold price is set in dollars. I wouldn’t be surprised if to counter this, the gold market will be buoyant up until the vote. We’re already having people ask us for Kilo Bars and hundreds of Krugerrands in preparation.
Verdict: Brexit is hovering and its uncertainty is beginning to be felt in the markets. Currency has already begun to feel downward pressures. The Bank of England have also given a sharp warning that in the even of a Brexit we will likely fall back into recession. Bank of England Growth Forecast has been revised down to 2% which reflect this sentiment. In times of uncertainty as with 2007 & 2008, to remain with strong purchasing powers and to stablise their capital, investors flooded into gold. I call it the “law of the yellow metal” and Britain for the next few months is in the Dock.
Article by Michael Cooper
Gold: Why Diversify Your Wealth?
I was sitting on my train this morning and I heard three separate banal idle commuter conversations all about the same topic. It actually made me laugh. Which topic of conversation do Brits love to talk about the most? The Weather. I’ve actually just come back from Lisbon where the weather ranged between 20 and 25 degrees, so I suppose I was catching up on the weather news I so longingly missed. By the sounds of things it has been sunny, clear, rainy and snowy. Typical good old British weather. Leave the house in the morning in a rain jacket, only to find the weather turns surprisingly warm by the afternoon and before you know it in the evening, you’ve got sleet. As a Brit you have to prepare for all eventualities and diversify accordingly.
This leads me to my next point. Whilst in Lisbon, I was chatting to a chap who works for himself in apparently one of the recovering industries in Portugal’s economy – Tourism. In 2015, Portugal’s GDP was €179,410 billion with tourism providing 6.4% of GDP, approximately €11,482 billion. He told me that everything was in the pan apart from Tourism. I’m not sure that is strictly true after doing a bit of research on Portugal’s GDP share per sector – but I guess it is a visibly noticeable improvement – more people and more coaches in the capital Lisbon. This will of course result in more bars and restaurants opening and cabs/tuk tuks and the like will see more footfall and punters. The hope for Portugal is that tourism really takes off over the next few years and increases to help bolster it’s share of the overall GDP. A risky strategy with no guaranteed returns.
After having a chat with this chap and reading more about economics in a copy of National Geographic, it made me think. Over-reliance in one type of industry/sector/monetary policy in the case of the Federal Reserve (FED), is risky. It only takes a slight adjustment made outside of your realm of control and you will be facing a problem. Currently I feel that there is an overexposure present in the global economy of all/nearly all eggs in one basket. The strength of the dollar combined with over-indulgently awaiting news and analysis preceding Federal Open Market Committee (FOMC) announcements, is creating too many ripples. It is the same in Europe and the European Central Bank (ECB) so it isn’t just North America, but the reality is the US is the strongest economy. In my opinion it is the lack of diversity in Monetary Policy (and the systemic problems in the banking industry) that filters down through the rest of the economy, which ultimately means that equities and currency will be manipulated and targeted, just as FOMC do for the dollar.
The Bank of Japan (BoJ) announced yesterday something quite “unexpected” – to vote to keep monetary policy in negative territory and not to relax the current policy. Why anyone thought this was unexpected I’m not sure: 1) BoJ took the initiative originally to aggressively set a negative interest rate 2) Japan have been losing ground in the currency war between the US, the result of this decision means they will capture more ground on the dollar 3) Weak data about the US has already flown round the news so it is no surprise Japan want to capitalise on that through arbitrage 4) They like the US will want to keep parity with China who are buying the alternative asset: gold. What the BoJ have done is in essence prove a point. Do not expect the expected. Economics is interesting because of patterns and algorithms, but it is also interesting because of mercurial swift change and corrections.
I guess the moral of this story is this: diversify and prepare. The idea of buying gold now is more important than ever. If you don’t prepare and take that initiative to diversify and pack your rain jacket in the morning, you may well get drowned by the monsoon in the evening. Thankfully Portugal has sunny weather… mostly.
Article by Michael Cooper