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The Gold Market Quarterly Update

Friday, June 29, 2018

In a period of intense geopolitical upheaval, the gold market has experienced a level of volatility over the last three months that’s been unseen for some time. After the imposition of President Trump’s steel and aluminium tariffs on the EU, China, Canada, Mexico and others, as well as the continuing tensions and developments in North Korean relations – the gold price has certainly experienced some turmoil over the last three months.

Gold opened the period on April’s first day of trade at £949.65. By the end of June, the gold price experienced highs of £983.83 and lows of £937.24, and ended, at the time of writing, at an almost identical price to where it started at £949.53.

Early dollar uncertainty

Gold deteriorated in value quickly after the beginning of the month, against an unexpected surge in the value of the dollar and resulting confidence in the strength of the American economy. The month’s opening price of £949.65 was itself a retreat on higher prices at the end of March, and the value continued to sink to £944.18 on the 12th April, for similar reasons. The lowest spot price anywhere between April and June was recorded in the first half of April, when, on the 17th, it fell to £937.24.

Tensions in North Korea

North Korea has dominated the gold price headlines and other precious metals news for months, and this period is no different. With increasing confusion as to whether de-nuclearisation talks with United States President Donald Trump were set to occur, many conflicting letters to and from and, finally, a summit – there’s certainly been some ups and downs.

The effect of these circumstances on the gold price in May was actually somewhat less than was expected. Nonetheless, North Korean events nudged the price up from its lows towards the end of April, which then eased once again to £955.09 on the final day of April.

Continued strong performance of the American economy caused sterling to become cheaper in relation to the dollar through the rest of May, which raised the price of gold relative to sterling. Gold therefore hit highs of almost £970 on both the 4th and 10th of May.

Turmoil in Italy

By the end of May, headlines around the world were dominated by news of the chaos in Italy as political parties struggled to assemble a coalition after a fractious and bitter election some months ago.  After dipping on the 17th to £952.07, prices continued to rise again through May to £978.41 on the 25th May and the highest figure seen across all three months, £983.83 on the 29th May.

This followed ‘heavy selling’ across European financial markets in response to the Italian crisis, which reportedly had investors fearing a snap re-election in Italy. The upcoming no-confidence vote in Spanish Prime Minister Mariano Rajoy, which he went on to lose, also bolstered gold during this period.

Trump tariffs

Prices fell over the beginning of June as tensions eased. Gold had a brief surge on the 14th, when the European Central Bank announced its plans to maintain interest rates at the same level. On the same day, silver reached a two-month peak against the dollar.

Things were to change the very next day however, when a host of investors sold up supplies of the commodity simultaneously, causing a one-day change in value from £977.71 on the 14th June to £968.69 on the 15th.

Investors bought gold expecting the price to rise after both the imposition of the Trump tariffs (which affected the price less than expected) and the expected rise of European interest rates (which didn’t happen). Mass simultaneous liquidation of assets thus quickly suppressed the gold price.

From this low point of £968.69, prices continued to fall through the remainder of June, as the American economy, the dollar, and equities steadily recovered from the shock that the tariffs had caused. As we approach the end of June, the price is now hovering around £950.

Buy gold bullion

As one of the most reliable and cost effective UK gold companies available, at the Gold Bullion Company we update our prices automatically based on the live gold price. So if you’re looking to buy gold bars or buy gold coins, you can be sure to take advantage of the fluctuations in gold price when you buy from us.

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Buy Gold Bullion Coins – But Which Ones?

Wednesday, June 20, 2018

If you pay attention to our blog regularly, you’ll probably hear us waxing lyrical at some length about the many benefits when you buy gold bullion coins. And rightfully so - many people in investment communities consider gold a reliable hedge against inflation and economic uncertainty. That being said, there’s a whole load of reasons why people choose to buy gold bullion coins – and it’s not always immediately clear where to buy gold or which coins are best for your interests and requirements.

So here are a few ideas to get you started.

Coin collectors

If you’ve got no interest in gold’s investment potential whatsoever, and you just want to build a gold coin collection you can admire – then the changing fortunes of the gold price probably aren’t going to affect you all that much other than to help you determine when is the best time to buy gold. So really, you should just buy whatever gold coins you want within your budget.

That being said, there’s a whole bunch of different gold coins out there, so it is worth narrowing things down a bit. If you’re interested in the evolution of our currency, you might want to look at historical gold coins and focus on what’s on offer here rather than among the more recent commemorative releases.

If you’re interested in celebrating aspects of British culture, like the Royal Family for instance, then more recent variants like the Queen’s Beast series of commemorative gold coins could be exactly what you’re looking for.

The Queen’s Beast series are actually one range of coins that we’ve seen huge levels of demand for. The original first sales of the older releases from this commemorative range are already gone and demand has started to push the price up. Will we see the same thing play out with the most recent release, the Black Bull of Clarence? Watch this space.

Investors

What if you’re just not that interested in the historic or commemorative value of a gold coin and, truth be told, you just want to make returns on your investment?

Many people will think that historical coinage is the best way to do this – we often hear stories about old coins that used to be next to worthless being cashed in for a profit many years later. But in actual fact, this is quite a rare occurrence.

Sure, some historical coins rise significantly in value – but that’s generally more due to scarcity and somewhat unpredictable demand rather than their age. But it takes decades for a historical premium to rise enough to justify the initial purchase, and the added factor of rarity is highly unpredictable.

You can buy a gold coin and sit on it with the hope that you’ll be holding one of the few remaining coins of that series in 50 years’ time and suddenly collectors everywhere will be desperate to get their hands on your coin. But it’s something of a hit or miss strategy.

Here’s an alternative that’s more likely to offer reliable returns on your investment. Look for a gold coin with the smallest possible premiums over the gold spot price.

By buying gold coins for the direct value of their gold content, measured by the live gold price, you’ll be looking at a more sensible and reliable investment strategy. To coin a phrase - a gold coin will always be worth its weight in gold, while its historical and rarity values are far less dependable and quantifiable.

Gold coin investors will do well to look to world-renowned gold coins like the gold Britannia, or gold Sovereign (the value and purity of which can never be in doubt). In fact, the secondary gold market, where premiums are smallest, could well be the right purchase for you to get hold of gold coins at a great price.

A bit of both

Let’s be honest, most people buy gold coins for a bit of both: the thrill of holding a piece of history and the financial reassurance that only solid gold can bring. Perhaps you’re a collector with an interest in coins for their historical and commemorative value, but chances are you’d be pretty happy to see your collection fetch a nice addition to your pension in 30 years or so.

If you’re a particular history buff, then old gold coins will certainly have their appeal to complete your collections. But generally, building up a recent collection of gold coins, be it the Queen’s Beast coin series, or commemorative gold Sovereigns, will be an easier way of combining the benefits of both styles of gold coin ownership.

Best UK gold companies

If you’re looking to buy bullion by post, whether it’s gold coins or gold bars, there are certainly a wide range of places you can look. For the best price for your gold, however, you’re going to want to find a company that charges the lowest premiums above the spot gold price.

Luckily, the prices on the Gold Bullion Company website, whether for gold bars or gold coins, are automatically updated based on the gold price. So whether you’re building up a Victorian gold Sovereign collection, or planning a retirement fund – you’ll know where to go next time you want to buy gold coins.

So What Did Kim Jong-un Just Do to the Gold Price?

Tuesday, May 29, 2018

We’ve done a lot of gold price updates over the last year. And that ever-infamous despot Kim Jong-un has a nasty habit of appearing in pretty much every one of them. Why’s that, you might ask? Well, what happens on the other side of the world doesn’t tend to stay there – and it has a big effect on the gold price back here at home.

And as far as big events around the world go, North Korea tends to take the biscuit.

In pretty much every circumstance, if North Korea does something that threatens global stability, there’s a sharp jump in the gold price.

In the last month or two, we’ve experienced both historic peace talks and threatening language between the two countries on the Korean peninsula, and we’ve seen evidence that a meeting between Kim Jong-un and President Trump is either ‘uncertain’ or ‘imminent’ - depending on the day.

So logic would dictate that this May has been one of gold’s most volatile on record.

Well, it just so turns out that it really hasn’t. In fact, in pretty much all of these instances, the opposite of what we expected to happen eventually occurred. So what’s happened to the Kim Jong-un effect on gold?

Politics’ influence on the gold price

Rule one of the gold price is when bad things happen around the world, gold gets more expensive. That’s because gold is a trusted, safe-haven commodity. When things look uncertain, both financially and politically, demand for gold rises.

And what are the biggest examples of that? Look at a gold price chart – you’ll see sharp jumps after the 2008 financial crisis, during the crisis in the Eurozone of 2012 and after the result of the Brexit referendum in 2016.

But strangely, in a month where we’ve seen such profound political developments, the rules seem to have changed somewhat.

What happened to the gold price this month?

The historic peace talks we discussed earlier occurred on the 27th April, just over a month ago. Where such a sign of peace would usually depress the gold price, we instead saw barely any movement at all. In fact, it took four days for gold to substantially change – by which time it’s likely that other factors had far more direct an influence on its value.

That was probably the most conciliatory moment we’ve seen since between the two Korean nations, and tensions have since risen once again. To boot, the prospect of US peace talks with Korea seems increasingly uncertain. So, in quite the opposite way to before, you’d expect gold prices to steadily rise again over the course of the month. Has that happened? Well not really.

In fact, gold even experienced one of its most dramatic two-day falls of the year so far, losing 1.4 per cent of its morning spot value between the 14th and 16th of this month. If that wasn’t all confusing enough already, it happened right after one of the most profound geopolitical disasters of the month, the Israeli attack on Palestine.

So have the rules changed?

Before we all go crazy and start selling gold – let’s just take a moment to consider why this could be. After all, markets are complicated, and black and white narratives are never as easy as they seem.

The chances are the tried and tested methods of predicting the gold price remain largely dependable. We certainly can’t assume that gold has suddenly reversed a centuries-old correlation based on one month’s data.

In fact, there’s a combination of two main factors most likely to be causing this change.

  1. Firstly, there’s a good chance that other factors are having more profound an effect on the gold price than geopolitical ones. In particular, the developments in the US economy seem to be having growing influence, and could be simply doing a better job of pulling gold in the opposite direction than any geopolitical uncertainty.
  2. The second is more an argument of perspective. With chaos seeming to reign ever-supreme in the geopolitical world, there’s a good chance that investors just simply don’t know what to make of what’s going on anymore. When contradictory reports and suspicions come out of Washington and Pyongyang every other week, it’s no wonder the effect of these reports on the gold price is dampening.

Should you still buy gold?!

We think there are just as many reasons to buy gold as there ever were. But if you’re looking to which factors are a most reliable gauge of the future gold price – it seems that the American economy is increasingly taking centre stage over the geopolitical scene. In the months following one of the most profound tax reforms in US economic history, this hardly seems surprising.

Nonetheless, it’ll certainly be interesting to see how the markets develop over the coming months. Is the effect of geopolitical turmoil over, or will it simply take a little more than transpacific squabbling for it to materialise? Only time will tell.

In the meantime, make sure you stock up on your gold bars and gold coins.