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The Gold Price in 2020 - Whats It Worth

Monday, January 20, 2020

The UN officially recognises as many as 180 currencies in active circulation, across 195 countries. You can bet your bottom dollar, pound or yuan that where there’s money, there’ll be gold. The only issue is that one troy ounce of gold can be worth drastically different things, depending on the currency you’re using.

If you’ve been checking the value of gold, especially looking at UK gold prices, you’ll see prices have outperformed gold as priced in US dollar terms. Why is this so, and how is the price of gold actually measured?

The dollar dictates sentiment

To fully understand why the gold price behaves the way it does, you need to start by looking at the US dollar. It’s the world’s largest reserve currency, and historically speaking, the performance of the US dollar or the US economy as whole dictates how high or low gold prices will go.

The Gold Standard of days long gone kept a lid on prices for many years, and a country’s fortunes were heavily dependent on how much gold was held within its national borders. After 1944, the Bretton Woods system kept currencies in check, and if you were a country with a falling supply of gold reserves, you would be likely to have to devalue your currency, in line with the requirements of the Gold Standard.

The 1970s changed everything - in 1971, President Nixon’s pivotal role in ending the Bretton Woods system led to the dollar becoming what is termed a fiat currency - its value was now determined based on the physical supply of dollars sloshing around the currency markets. High inflation soon followed, and now that gold was no longer constrained, it reacted strongly by soaring in value.

Half a century later, gold remains a safe haven in times of economic distress. Moves to devalue the dollar almost always result in higher prices, but financial shocks also help push prices higher, as investors buy gold, if other assets suddenly crash in value.

To keep an eye on where UK gold prices are currently at, check out our free Live Gold Prices chart - it’s updated every few minutes, giving you an insight into where precious metals are heading.

The Gold Fix - how it impacts gold prices

You might be asking, how are gold prices actually measured? In short, they’re fixed.

No, we don’t mean they’re inaccurate or rigged. The Gold Fix simply means that the price is set twice daily (10:30am and 3pm London GMT) by the ICE Benchmark Administration during a conference call, where they ultimately determine where the price is, in US dollars. In addition, sterling and Euro prices are available, but purely indicative ones, for settlement purposes only.

Something that UK-based gold investors have seen in the last five years is that gold has shown a particular outperformance in pound sterling terms, compared to the dollar. But how could this be? The US and the UK share a language, and their economies aren’t too dissimilar in per-capita terms.

Simply put, the volatility in the UK gold price stems from fluctuations in the currency markets themselves. 

The pound has been steadily devaluing against the US dollar over the last 150 years, with two large devaluations more recently in 2008 and 2014-16. During the last 20 years, gold in UK terms tracked the US price, as gold prices enjoyed a decade-long bull run.

However, sterling weakness from 2010 onwards led to greater upward momentum, purely due to this currency effect, meaning that despite gold peaking in dollar terms in 2011, it managed to break out to a new all-time high in sterling, as it was grinding upwards, slowly but surely.

2019 was a great year for record-high prices in the UK, hitting over £1,200 per troy ounce. Higher prices could help set the stage for an even greater bull run, if the pound remains weak, due to Brexit fears over the coming year.

Dubai’s gold price dilemma

In the case of Dubai, gold prices haven’t always been what they seemed. Dubai is one of the largest emirates of the UAE, and is well-renowned for its great gold markets or souks, and the jewellery, coins and gold bullion you can buy. Investors will know that Dubai has a massive supply of the yellow metal, and there are attractive reasons to invest in and store gold in this part of the world.

Despite that, gold prices have been slightly tricky to measure until recently. In 2015, Dubai’s Department of Economic Development (DED) realised gold sellers were potentially confusing tourists, so it stepped in to force them to change their ways, setting out guidelines for ensuring that all gold sellers installed screens in their shops, displaying an “official” price of gold which was uniform from seller to seller.

The initiative was enforced, as they wished to eliminate the perception that foreign buyers would be feeling deceived in some way, having some sellers demanding higher prices than the markets had intended. One thing of interest to investors is that the DED also decided to make moves to protect Dubai’s gold and jewellery industries, by placing a three to five per cent mark up on gold prices.

Gold prices - not what they seem

The case of Dubai goes to show that gold prices can be radically altered, especially by government intervention. Higher UK gold prices due to sterling weakness also demonstrate how the economic vulnerability of a country can be a great determining factor in ensuring higher gold prices.

Here in the UK, gold prices remain close to those all-time highs in 2019, while gold investors in the US are still remaining stuck at lower levels. This means if you’re thinking about investing in gold, especially with us here at the Gold Bullion Company, it’s important to consider how sterling is doing.

Not only that, you need something of a double or even 2020 vision, by being mindful about price action in dollar terms too. Tensions in the Middle East, concerns over the ongoing trade war and the impact of Brexit are all factors that could help push US prices higher, and if the pound weakens further, you could reap even greater rewards.

If 2020 feels like the time for you to start taking a chance by investing in gold, why not get in touch with us, here at the Gold Bullion Company today?

Safe Haven Demand Is Still A Real Concept

Tuesday, January 14, 2020

The recent killing of Iranian general Qassam Soleimani by the US in Iraq sparked ‘safe haven’ buying of gold amid fears that the US drone strike could be the first step towards a re-escalating conflict in the Middle East. As a result, on Monday 6th January, Gold Prices in $USD rose to hit levels not seen since early 2013 at $1580 per ounce, reflecting a rise of around 4% in a week.

Overnight on the 7th to the 8th of January retaliatory missile strikes by Iran on US military bases in Iraq prompted a further spike in the Gold Price.  The lack of US casualties may or may not have been intentional on the part of the Iranians but the action drove the Gold Price above $1600 per ounce. The world then appeared to hold its breath awaiting a US response but the price rise quickly abated when it became clear that no instant response from the US was materialising. Prices in $USD then fell back slightly over the next 48 hours as tensions eased and they eventually stabilised in the region of $1550 per ounce.

Many analysts believe that this $USD price ‘break out’ could be the trigger for a sustained period of price increases known as a bull run, often preceded by a lull in price movement as the market consolidates after an initial steep rise.

 It is interesting to note that these price rises were in the Dollar Gold Price which sets the benchmark for global rates. Prices in other currencies rose depending on the $USD exchange rate for each currency. These price increases are very different from the record breaking increases that we have seen in the £GBP price during 2019 which mostly resulted from a weakening of the Pound against the Dollar amplifying the extent of rises in the $USD global price.

Silver Prices have also risen during the recent tensions. Having experienced a three month low of $16.58 per ounce in early December 2019, Silver followed the Gold trend during the recent crisis, reaching $18.43 on 6th January and $18.57 on the 8th. Again, following a stabilisation of the political situation, Silver has fallen back to roughly pre-crisis levels.

It remains to be seen how the US/Iran situation will develop but this price movement certainly reinforces the understanding that gold is still seen as a safe haven for investors during times of geopolitical uncertainty.

The fact remains that the current crisis is by no means over and simply adds to a growing list of potential flashpoints and global tensions. The ongoing trade disputes between the US and China and the potential for a resumption of the war of words, or worse, between the US and North Korea all highlight the fact that the US faces multiple and varied threats to its military and economic supremacy around the world.

It has long been suggested that the Middle East is likely to provide the spark for the next global-scale conflict. Despite the current lull in activity in the region, changing alliances and renewed military build-ups with many groups acting as proxies for countries within the region all make for a very volatile and unpredictable period in global history.

The need for a ‘safe haven’ for investors’ funds is unlikely to be disputed for some time to come.

The Year of the Mouse Approaches for Gold Investors

Wednesday, December 18, 2019

The signs of the zodiac have something of their own creation myth. Depending on who tells it to you, it begins with either Buddha himself or the Jade Emperor assembling a meeting of all the great animals.

The Mouse, a nimble and cunning little creature, was one of the quickest to arrive, being given the honour of being the first sign of the zodiac. In comparison, the Pig was slothful and lazy, falling asleep along the way, arriving late. Unsurprisingly, the Pig was given the honour as the 12th and final sign of the zodiac.

As the price of gold seemingly enters into a Pig-like slumber at the tail end of 2019, 2020 could prove to be a year for more cunning investments, as the Year of the Mouse returns once again.

Fortune favours the Mouse

2019 has been a year of highs and lows for the gold markets. It got off to a slow start, with prices staying range-bound for much of the first half, in anticipation of the UK’s original expected EU withdrawal date in March 2019. However, that simply wasn’t to be.

Brexit was delayed, political uncertainty soared and a change in government led to gold prices soaring to an all-time high of £1,275 per troy ounce, back in September. As summer turned to autumn, investors began to await signs of a resolution to the Brexit saga, with gold selling off by almost 15 per cent in just three months.

Prices are now closer to £1,124, but prices remain over 10 per cent higher than they were at the end of 2018, indicating how resilient the recent bull run has proved to be.

Just as the Mouse was able to show great speed and cunning in the old fable, the Year of the Mouse could be just the year for investors to buy gold and find a suitable opportunity to lock in some great gains, as we head into the new decade.

Not out of the woods yet

This month’s election resulted in a victory for the Conservatives, with an 80-seat-strong majority, the largest the party has won since the height of the Thatcher era in 1987. However, great political gains don’t necessarily translate into strong and stable markets.

Thatcher’s third victory in 1987 was followed by a jaw-dropping stock market crash, colloquially known as Black Monday, where stocks crashed over 20 per cent in a matter of hours. In the meantime, gold held its nerve, saving investors from losing out.

Labour’s third successive election victory in 2005 wasn’t a guarantee of market stability either. Within just three years, the global economy was on the verge of the worst downturn since the Great Depression. It just goes to show that a strong government can’t always stop economic shocks from happening, no matter how solid a government’s majority may be.

With this in mind, Brexit is still a recurring feature in many investors’ minds. Although the likelihood of the UK leaving the EU at the end of January 2020 has increased dramatically, this initial departure deadline is just the first step of a process that will see the UK engaged in months of trade negotiations.

As the deadline runs out, another clock starts ticking, towards December 2020, and the end of the UK’s transition period.

The 2020s - choose your portfolio carefully

For many, the 2010s were even more of a rollercoaster for some investors than the 2000s. The 2020s look set to be even more of a rollercoaster. As mentioned, Brexit will linger, despite seemingly having been resolved already. Add to this the stress of an ongoing trade war between the US and China, and gold prices could easily break to new highs.

The new decade, the 2020s, will be full of investment opportunities you can’t afford to miss. Gold could be one of those opportunities. Like the Mouse, you will need to show great wit and avoid the crowded trades. That’s why the Gold Bullion Company is pleased to reveal its Year of the Mouse gold coins.

The 2020 Year of the Mouse 1oz coin is a worthy investment for any investor who might be hoping for some of that much-needed optimism and energy to rub off on them next year. Priced at £1,181.83 per troy ounce, each coin is made of 999.9 fine gold bullion. Get your very own coin today - the next Year of the Mouse won’t be until 2032!

Gold as the ultimate safe haven in 2020

As we enter the 2020s, there will be a need for clarity - think of gold as a form of 2020 vision. Gold has a knack for signalling major shifts in market sentiment. Remember how gold bottomed out in 1999, mere months before the Dot Com bust in March 2000.

Gold entered a new price rally in early 2016, in anticipation of the EU referendum, triggering a new bull-run phase that could continue to have legs well into the 2020s. The yellow metal has a curious habit of making investors ask the question: “What does gold know that we don’t?” - it always makes sense to be ahead of the curve, so why not consider investing in gold today?

Not only do we specialise in Lunar gold coins - the Gold Bullion company offers other tangible assets including Tax-Free Gold, free from VAT and Capital Gains Tax, as well as offering a range of gold bullion bars, both large and small.

They make ideal investments, whether you wish to put aside a fraction of your portfolio into something more diverse, or wish to make some impressive gains over the long-term with some more substantial holdings.

For more information about investing in gold with the Gold Bullion Company, contact us here.

We look forward to helping with any enquiries you may have.