January and February Precious Metal Analysis

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
£968.85

$1312.80

€1087.52

 £954.78

$1332.75

€1081.26

-£14.07

+$19.95

-€6.26

– 1.45%

+ 1.51%

– 0.57%

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

+ 0.0338

+0.0054

+2.48%

+0.47%

First Silver Fix of the Year  Today’s Silver Fix Change +/- Percentage Change
£12.59

$17.06

€14.15

£11.91

$16.61

€13.48

-£0.68

-$0.45

-€0.67

 -5.40%

-2.63%

-4.73%

Gold Price Chart

Gold Price Chart

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.