Tonight, on Thursday 1st August, the gold price in GBP has broken through to reach its highest ever recorded gold price on record. As I write this, new heights never seen before have been reached tonight. There is so much to say on the matter, but it is only right that in these circumstances I give you my own personal opinions. This is in no way to influence you on how you should act, as we are not investment advisors, but we can reflect the market position and its history so far.
As we have mentioned many times before, when you are examining the gold price you must also look at the exchange rates between the two currencies USD and GBP. As Gold is traded in USD around the world, the level of GBP/USD (the cable) is most relevant to the price we see and use in the UK.
Just now we are at short/medium term historical lows in the value of GBP to USD. Currently at 1.21 USD (at the time of writing) for every 1 GBP, these low rates are bringing high gold prices to us here in the UK. As Brexit No Deal threatens as a more likely scenario, then the value of the pound may well continue downwards adding more and more pressure on the rate of GBP to USD. This means a higher gold price for us. If our European cousins blink and start to even negotiate with the new UK Government, then this may well see a temporary upwards reversal in the GBP to USD rate with a bounce and strengthening of the rates, meaning a dip in Gold prices.
Smashed It in GBP
Unlikely as I feel that this possibility may be, there are many more important factors in my mind which may influence the gold price, and therefore to a lesser extent the silver price, over the next few months - until 31st October at least. May I just remind everyone that this is also the 1st August, a time when everyone is on holiday, and the old adage of “Sell in May and go away” as nothing happens in markets until the summer holidays are well and truly over, has been blown completely away!
While we are enjoying a record gold price and, yes, Gold in USD has seen a significant price rise recently, my wish is to draw your attention to the fact that we are still over 500 US Dollars away from record Gold prices in USD.
When the previous record in USD price was reached of around 1920 USD per ounce back in 2011, then we had our record 1188GBP per ounce for Gold. Now we have smashed that price in GBP - BUT we are still 520 US Dollars away in the world rated price from the previous high. Such is the difference that exchange rates can make.
This feels like 2004/2005 to me. Back then gold had moved from very lows of 250USD per ounce up towards 300/350 USD per ounce and very quickly gathered pace as the Financial crisis ensued upwards finishing around 1920 USD per ounce in 2011.
It is very much only my opinion, but the situation seems and feels familiar to me. There are many Global Macroeconomic situations which are extremely concerning. To name a few, Iran, Syria, Russia and its interference in world affairs, a trade war heating-up again with USA and China, North Korea to mention a few. Then there is the dreaded B***** here. The Global economic outlook is also showing disturbing signs. Interest rates are being cut again and threatened to be cut further in the USA and in Europe. There is even talk of further QE- another round of money printing to keep the economies chasing the inflation dragon which seems impossible to catch. Interest rates are going negative and a big pointer is the Treasury Bond rate yields in the USA which are at a very low ebb again and point directly to gold investments becoming worthwhile.
You don’t have to look far on the internet to see some big hedge fund owners and advisors saying they are in Gold again.
The solutions to the last Financial crisis only showed us that they kicked the can down the road again and again. The road is getting shorter each time. It is for those reasons that I believe we are in a similar position to 2004/2005. We may still have blips and bumps and dips in the precious metal prices as we go along. Nothing moves in a straight line and I am sure those that can, will try and tell us not to be concerned and not to worry about things while they try and catch the can to give it another good kicking. In the meantime, bear in mind, even to just match tonight’s highest Gold prices in USD - we still have 520 US Dollars to go.
Paul Atkinson is the Managing Director of Atkinsons Gold Bullion and Coins based in Sutton Coldfield.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.