The phrase we hear more often than any is; “Is now a good time to buy gold?”. I’ll address that in this update.
One good phrase for timing the gold market is; “Its not the timing of the market, but time in the market”. Trying to buy at the bottom and sell at the top may sound like a wise strategy, but in reality it’s impossible and can lead to reducing your returns and security. The fact is that holding gold over the long term has proven over the years to provide a secure storage of wealth and outperform inflation.
But I don’t want to just beat inflation, I want big returns…..
It’s human nature to want to beat inflation by a large margin and gain more substantial returns. So timing in and out of the market plays a role in achieving this.
While it’s impossible to predict the future, despite many so-called market experts making gold price predictions, timing is about stacking the odds in your favour. This means you look at market fundamentals and choose to invest in assets which look most likely to perform well.
While allocating your money into different asset classes is always recommended, it’s fair to say that now seems like a good time to buy gold.
Because gold has such a long history, we’re able to see how gold has performed before to help predict how it might perform over the next few years.
The gold price has almost always risen in times of severe economic downturns.
Are we heading into an economic downturn?
Even before the pandemic, markets were overheated and global debt at record highs. Since Covid took hold, Governments around the world have opted to print more fiat money to support their suffering communities in the form of furlough support. Now, nearly 2 years on from the start, there seems to be a lethal cocktail mixing which could lead to the mother of all recessions.
The following ingredients are now in play;
Inflation is rising quickly around the world. This is expected when Quantitative Easing programs around the world have been operating at full tilt. Increase the supply of a currency, and it’s value will fall. But we’re also witnessing inflation from broken supply chains. Petrol, building materials, electronic components for cars, food, carbon dioxide, the list goes on. They are all contributing to prices rising at alarming rates. Consequence; Money in the bank is losing value every day. The cost of living is rising. Interest rates will rise soon, increasing mortgage payments for many.
Tax hikes are being put in place to try to reduce (or more realistically stem) the spiralling debt. This can be in the form of increasing National Insurance, reduced tax free thresholds for taxes like Capital Gains, and reduced welfare. Consequence: Less disposable income for the average person means economic growth will be strangled
Continued restrictions are dampening trade. Travel limitations and business restrictions are preventing businesses getting back to anywhere near full capacity. High streets are quiet and shops are closing. Furloughing has ended so the safety net is now gone. Consequences: We’re likely to see a spike in companies going under and individuals losing their jobs
Equity and property markets will likely fall in response to negative growth, poor company performance and less ability to afford to move home.
Continued uncertainty will dampen consumer and corporate confidence. With further spikes in Covid cases, potential further lockdowns and possible ‘long-Covid’ consequences, companies will limit investment and consumers spend less.
How is gold supply and demand at the moment?
During the height of the pandemic, we saw enquiries increase around 700% year on year. That initial rush has calmed, but demand from new investors now seeking the security and protection gold offers as a safe haven, continues to grow. Overall demand remains above pre-pandemic levels and we expect this to rise as recession kicks in.
Institutional money will also increase gold holdings as many competing asset classes suffer. They will look to move allocations out of stocks, bonds and cash, and into gold.
And gold supply….?
Supply of new coins and bars is managing to keep pace with demand. However, due to very few gold holders wishing to sell, we still see huge shortages in the secondary market. It has now been 2 years since we saw decent amounts of sellers in the markets. With the looming economic difficulties ahead, I can’t envisage this changing anytime soon. Premiums on many gold coins are increasing.
Where is the gold price?
As of the time of writing (November 2021), the gold price is moving upwards. It remains more than 10% below it’s all time high in 2020, but has gained around 8% in the past month, as momentum builds.
This was expected as we moved out of the furlough support and inflation began to take hold. While we can’t predict with certainty where the gold price will move in the short term, it seems that now represents good value.
With all these elements working together and interest rates likely to rise for the first time in a decade, it seems like now is a good time to be buying gold.
In this video, I’ll show you how to find the gold price today, track and analyse its performance and then exploit any themes and strategies to invest over the medium to long term.
The simplest and quickest way to track the gold price right now is to look at the top of our website. The price is updated every 60 seconds and displayed in both ounces and grams. An alternative would be to download a gold app like Kitco to your phone so you can track prices on the move.
It’s important to understand that this is the benchmark price, not necessarily the exact price at which you can buy and sell gold. If you want to learn more about how the gold price works, be sure to checkout out our other video ‘Understanding the gold price’.
If you want to dive a bit deeper, then our Gold Price Chart page features an interactive historical price graph and explains the gold price in detail, including;
If you want to invest in gold, be sure to study this page first.
So now we know the gold price, how can we profit over the medium to long term?
1. Buy in dips
Over the short term, the gold price can be volatile. Try to buy your gold on a dip day, when the price is lower, rather than when the price has moved higher. This may only be a slight difference, but every little bit helps improve profits.
Looking at historical price charts will help you understand where the current gold price is in a historical context. Right now, we can see the price is still below its all-time high of 2020. Buying during the quieter times when the price is relatively low has proven to produce the best long term profits time and again.
2. Long term portfolio insurance and wealth preservation
Rather than trying to trade the gold market, or predicting price movements, a good strategy is to see gold as a long term protection. Its safe haven status means that regardless of the current gold price if stock markets and paper currency devalue, gold tends to rise in worth. This means, your overall wealth is protected from nasty market downturns.
With low interest rates, bank savings rates are also low, usually lower than inflation itself. This can mean that leaving money in the bank actually devalues every day it’s sat there. Gold has shown to outperform inflation over the long term, appealing to those seeking a store of wealth.
3. Buy gold regularly
An alternative strategy overcomes the need to really look at the gold price at all. Buying gold on a regular basis can average out the cost of gold so that when the price falls, you buy at the lower level. This approach appeals to those with limited capital to invest, but like the idea of gradually building up a gold holding, perhaps on a monthly basis. We offer a simple solution to achieve this with our Gold Monthly Saver, which starts from only £350/month.
So there you go. Start by doing some research on the gold price, understand how it works, and take a look at historical performance. Then grab one of our 3 strategies and invest away!
I hope you’ve found today’s video helpful. If so, please make sure you also check out our full catalogue of video guides covering everything you need to know about gold and silver.
Buy gold at the best prices from Physical Gold
If you’re looking to buy gold coins and bars at competitive prices, then take a look at Physical Gold’s online store. We’re able to offer gold at rock bottom prices, updated every 60 seconds with the live gold price. Quantity discounts are displayed online so you can decide the most economical way of buying.
If you need guidance on the buying process, or simply need help on which gold coins or bars to buy, then our friendly team are here to help. You can call on 020 7060 9992, engage on live chat from the website or leave us a message here.
Intrigued about who is most interested in gold prices worldwide, we sought to find out which country is tracking the price of gold the most. To do this, we analysed search data to find out how many times the phrases ‘gold price’ and ‘price of gold’ were searched per month in 155 countries before exploring these search results per 1,000 active internet users in each nation*.
To make the data as reliable as possible, we explored each of the phrases related to gold prices both in English and the specific country’s primary language. This created a clear picture of which countries are tracking gold prices the most around the world.
The top 20 countries tracking gold prices
Country most interested in price of gold
Taking the top spot for the country tracking gold prices the most is the United Arab Emirates, with a staggering 521,000 average monthly online searches, or 58.45 online searches a month for gold price per 1,000 active internet users, either looking to invest in solid gold bars or being interested in the current value of the metal.
Singapore, self-titled ‘Garden City’, comes in second place. According to our research, Singaporean’s search for the price of gold 184,500 times a month on average, which equates to 38.27 searches per 1,000 active internet users.
Third places goes to Qatar – one of the world’s richest countries – where residents make 76,800 searches per month on average. Despite having fewer searches than UAE and Singapore, when compared to the number of internet users in the country, this means there are 30.33 searches per 1,000 active internet users.
Even though New Zealanders make just 39,000 searches for ‘gold price’ on average each month, this equates to 9.12 searches a month per 1,000 active internet users in the country, ranking in eighth place.
UK and US in top 10
The United States and the United Kingdom follow closely behind each other in places nine and ten, respectively. The USA makes a total of 2,506,000 searches each month, which is equivalent to 8.02 searches per 1,000 internet users in the country. Comparatively, the UK falls short of this figure with 7.98 searches for ‘gold price’ for every 1,000 active internet users, after making 519,300 searches overall each month on average.
Despite having the highest number of searches for ‘gold price’ on average each month (3,720,600), India comes in fifteenth place when compared to searches made by web users in the country. In fact, there are 4.92 average monthly searches per 1,000 internet users in the Asian nation, which is 53.53 fewer searches than the United Arab Emirates in the first place.
This low ranking is a surprise as it’s common knowledge that gold has a central role in the country’s culture. The precious metal is considered a store of value, a symbol of wealth and status, and a fundamental part of many rituals, which explains why up to 25,000 tonnes of gold is accumulated in Indian households in jewellery, bars and coins.
Lastly, rounding off the top 20 countries most interested in tracking the price of gold are Austria and Nepal. According to our research, both countries have 2.21 average monthly searches per 1,000 active internet users.
Continents most interested in tracking gold prices
To identify which continents are most interested in tracking the price of gold, we calculated which continents each of the top 20 countries originate from.
Our analysis found that Asia is home to the most countries interested in tracking gold prices, as we found 13 Asian countries featured in the top 20. Europe comes next with four entries, including the UK, Ireland, Croatia, and Austria. Trailing behind with just two countries each are the continents of North America and Australia.
The full results
For each country in the top 50, com gathered data for the number of overall active internet users in each of the respective countries.
To get the results for online searches for gold price per 1,000 active internet users – PhysicalGold.com divided the overall figure for the number of active internet users in each country by thousand.
Thereafter, the average monthly online searches for gold price for each country figure was then divided by the answer from the calculation that was made in stage two for each respective country to establish the average monthly online searches for gold price per 1,000 internet users in each of the countries in the top 50.
There wasn’t enough data to include China in our results.
Please note: When analysing the data, the two key search terms/phrases related to gold prices were explored in English as well as each country’s respective primary language (where applicable) to increase the reliability of the results.
Until 2009, few people, if any, had heard about the virtual currency called Bitcoin. In 2008, this new form of currency, otherwise known as a cryptocurrency was invented. To date, no one knows who created the Bitcoin, but its invention has been attributed to a person or a team of individuals who used the name, Satoshi Nakamoto. The cryptocurrency was formally launched in 2009 and came into the market as open source.
Advantages of Bitcoin
As a cryptocurrency, Bitcoin has certain distinct advantages. It is a decentralised digital currency that does not have any control or governance by the banks of any nation. It is not controlled by the government of any country. The currency operates across a peer-to-peer network, eradicating the need for any third-party or intermediary. All transactions that use this cryptocurrency are verified electronically by network nodes. These transactions are encrypted and stored on a distributed ledger system known as a blockchain.
The blockchain derives its name from the way it operates. It is a chain of blocks, where every block contains a hash code connecting it to the previous block, all the way to the first one, which is known as the genesis block. This ensures that the system cannot be easily hacked into, as it is extremely difficult to alter the information contained across the entire chain. When a Bitcoin transaction happens, the information is sent to this network using purpose-built software applications. At this point in time, the network nodes validate these transactions and write them into the respective ledgers. The information is then broadcast to the other nodes within the system. Apart from data protection, the system also ensures that double-spending is prohibited. To make this happen, every input needs to have a previous unspent output within the blockchain. The first commercial transaction using Bitcoin took place in 2010 when the cryptocurrency was used to pay for two pizzas. At the time, the value of the Bitcoin was very low and the transaction was done for 10,000 Bitcoins.
How are Bitcoins generated?
Bitcoins are created through a process known as mining. It is essentially a service that creates records by using the processing power of computers. This activity maintains the sanctity of the blockchain, ensuring its consistency and completeness. At the same time, the process also ensures the security of the transactions, by making them un-alterable through the use of an SHA-256 cryptographic hash, which links across the blocks through the entire chain. However, every new block must have proof of work (POW), to ensure its acceptance by the entire network.
In the early days, Bitcoin miners used powerful computers known as GPUs (graphics processing unit) for this operation. These computers were faster and more adaptable in creating POW algorithms. However, today mining operations for Bitcoins been taken over by companies and these companies use large data centres, fitted with dedicated, specialised mining hardware. The mining companies generate Bitcoins through this intricate, expensive and energy-intensive process. Despite the complex security process, Bitcoins have been stolen from exchanges. The cryptocurrency has also come under criticism for the gigantic amounts of electricity used by the mining companies, at a time when the entire world wants to conserve energy and move towards green energy.
The legal status of Bitcoin
Due to the decentralised nature of the cryptocurrency, its regulation has been difficult. Since the currency is mainly traded in online exchanges, its use in the early days was fraught with controversy. Bitcoins have certain unprecedented characteristics that no other currency has seen before.
There is no central authority.
There is no central repository server – the cryptocurrency operates through a peer-to-peer network.
Central storage like currency holdings in a bank does not exist. Bitcoins use a distributed ledger system.
The distributed ledger is accessible to everybody, and anyone can store it on their computers.
The administration of the cryptocurrency is also distributed. Its ledger is maintained by a network of Bitcoin miners.
An amazing feature of the system is that anyone can become a miner.
Additions to this distributed ledger system are highly competitive. Any miner can create a new block, and it is impossible to predict who will.
New Bitcoins are generated as a reward for creating a new block. Therefore, anyone within the network can achieve this target. According to the protocol, only 21 million Bitcoins can be created.
New Bitcoin addresses require no approval system for its creation and anyone can create it.
Transactions do not need approval, and a confirmation is generated by the network once the transaction is deemed legitimate.
Several national banks across the world felt threatened by the new autonomy and lack of control presented by Bitcoin. In September 2017, China started the process of imposing a ban on trading in Bitcoins. The ban formally came into effect in February 2018. In the US, warnings were issued about trading and investments in Bitcoins. In July 2018, the Commodity Futures Trading Commission in the United States reiterated that any form of trading in cryptocurrencies is speculative and that there could be inherent risks associated with theft from hackers, as well as fraud and misrepresentation. Earlier, similar warnings had been issued by the European Banking Authority, regarding the price volatility of Bitcoins, absence of regulatory structure and the risk of fraud.
Risk of price manipulation
In May 2018, an investigation was launched by the US Justice Department about the possibility of price manipulation. The final price settlement of Bitcoin futures in the US is dependent on four cryptocurrency exchanges. The investigation looked into transaction data on these four exchanges in order to detect any unfair market practices.
History of the Bitcoin price
Bitcoin inventor Satoshi Nakamoto is estimated to have mined close to 1,000,000 Bitcoins, before handing over the controls to the Bitcoin Foundation and retiring from public life. By 2011, Bitcoins started to have parity to internationally accepted currencies. At the time, the Bitcoin price in US dollars was only $ 0.30. In 2011, the average USD to GBP price was 1.60. Therefore, the Bitcoin to GBP conversion was approximately 18p. Some people bought Bitcoins at this price. Imagine how rich they are today! Bitcoin closed in the year 2011, with the Bitcoin to GBP price at £3.29. However, Bitcoin to GBP prices faced extreme volatility at the time, with the Bitcoin to GBP price rising to £19.68 in June that year, before heading into a downward spiral.
The following year, 2012, saw the prices of Bitcoin in GBP rise to around £8.36 at the close of the year. However, volatility continued with the prices falling by as much as 49% to 57% throughout the year, followed by a period of stabilisation. This rollercoaster ride of the Bitcoin in GBP prices kept prudent investors away. However, that year also witnessed the creation of the Bitcoin Foundation. This was done primarily to lend a direction to the development of Bitcoin, leading to renewed hope in the prices of Bitcoin in GBP.
The rise of Bitcoin
2013 was an important year for Bitcoin. The year witnessed the greatest price rise of 1 Bitcoin in GBP. At the start of the year, the value of 1 Bitcoin in GBP was £8.36. However, by the end of the year, the price of 1 Bitcoin in GBP had risen to £484. But, it was also a year in which the cryptocurrency became mired in controversy. In March of the same year, there were problems with the blockchain and the distributed ledger system split into two independent chains for a few hours, before the problem was rectified.
In the same year, the US authorities also seized around 30,000 Bitcoins from an illegal trading site called Silk Road. The authorities also started taking action against Bitcoin exchanges in the US if they had not registered with the appropriate legal authorities. After China prohibited the use of Bitcoins, prices started falling drastically. At the start of 2014, the price of 1 Bitcoin in GBP stood at £484 but reduced to £206 by the end of the year.
From this period of uncertainty, Bitcoins made a slow recovery. By the end of 2015, 1 BTC to GBP conversion price rose to £285. The price continued to rise throughout 2016 and by the beginning of 2017, the price of 1 BTC to GBP had risen to £804. 2017 marked the revival of Bitcoin prices, partly fuelled by a software upgrade on the Bitcoin network. This upgrade, called Segwit, improved prices by around 50%. By July 2017, the price of one BTC to GBP was approximately £2,216. By the end of the year, the price of one BTC to GBP stood at £10,816.
The Chinese ban on Bitcoin trading, which started in February 2018 saw prices plummeting. The Bitcoin to pound price dropped to approximately £4,974 on 5th February 2018. By January 2019, the Bitcoin to pound price was £2,882, down by 72% from the peaks achieved in 2018.
In February 2019, the Quadriga Fintech controversy surfaced, when the company’s founder was reported dead in India. The Canadian cryptocurrency exchange, subsequently filed for bankruptcy, with around $200 million unaccounted for. Despite this market shock, Bitcoin continued to perform well and by June 2019, the Bitcoin to pound price had risen to £10,000. In an act of legitimacy, Intercontinental Exchange, the company that owns the New York Stock Exchange (NYSE), started a Bitcoin exchange to trade in its futures.
The COVID-19 pandemic
It would be unbelievable if the global pandemic had not impacted Bitcoin. As the pandemic took hold around the world, BTC to GBP prices fell to approximately £3,225 and below. However, 2020 witnessed a lot of support for the cryptocurrency from financial companies, who moved a percentage of their total assets to Bitcoins. The payment gateway, PayPal also allowed its customers to buy and sell Bitcoin using their payment platform. By November 2020, the BTC to GBP price had recovered and stood at £16,016.
This new BTC to GBP price was at an all-time high, and reinforced the faith of investors, as the cryptocurrency was able to buck its performance, while under pressure from the economic situation caused by the pandemic. The revival of the Bitcoin GBP price witnessed other corporate powerhouses following suit in the support of Bitcoin. These included life insurance companies, who were converting a part of their assets to Bitcoin and the high-tech automobile company Tesla that invested £1.08 billion in Bitcoin. Based on these factors, the Bitcoin GBP price went up to £35,597. Earlier in 2021, the Bitcoin GBP price rose by approximately £3,846 in an hour, when the Bitcoin received an endorsement from Elon Musk, founder of Tesla. With that rise alone, the Bitcoin price GBP reached a price of £28,691.
Current status of the Bitcoin price GBP
The live price of Bitcoin to pounds is a dynamically changing price, just like any other global currency. Most live price charts will update the Bitcoin price GBP within five seconds. After a turbulent start, Bitcoin has now established itself as the most important cryptocurrency, which is in high demand. Due to this, the Bitcoin to pounds price is quite high. However, investors believe that the Bitcoin to pounds price will continue to rise in the future.
From a high of £35,597 on 8 February 2021, the Bitcoin price pounds has already reduced slightly to £34,301 on 12 February 2021. But the Bitcoin price pounds had earlier in the day reached a high of £34,487. So, as an investor, these illustrations should give you an indication of the fluctuation and volatility of the Bitcoin price pounds. Many precious metal investors are now turning to Bitcoin, as there is speculation that it may replace precious metals as a repository of value.
Call us at Physical Gold to compare cryptocurrencies with precious metals
Our precious metal experts at Physical Gold can help you with the right advice and knowledge when it comes to comparisons between cryptocurrencies and precious metals. Call us today on (020) 7060 9992 or simply get in touch with us online through our website.
It is not surprising that many people find scrap gold inside their homes. Sometimes you may inherit the belongings of an old relative, or you may have some old jewellery, which is broken or damaged. All of this constitutes scrap gold. But what is the best way to evaluate this fortune in your possession? More importantly, how will you sell it? Read on to find out.
A gold price calculator from Physical Gold
What you need is a gold price calculator. As one of the country’s most reputed precious metal dealers, Physical Gold offers you a fair value for your scrap gold. We are able to tell you the price we are willing to pay for your gold in advance. Before you use a calculator, it is important to find out the total weight of the items you wish to sell. All you need is a digital weighing scale, and you can get a fairly accurate idea of the amount of gold you’re selling. An online gold price calculator is extremely easy to use.
All you need to do is enter the weight of your gold in grams. You also need to know the fineness of the gold. Many people would already be aware of this, however, if you aren’t, you can simply enter the number of carats you believe it to be. That’s all you really need to do. You can then click on the button, and we will show you the price we are willing to pay. We will even explain how we arrived at that price.
How can I sell my scrap gold?
The best and easiest way is to call Physical Gold on (020) 7060 9992. A member of our team will then guide you on what to do with your gold. If you have already evaluated the gold you possess through the online calculator, we will pay you the price indicated, after checking the weight and purity. Within five working days, the money can be in your account.
If you wish to post your gold to us, you must first book in the sale and then use the Royal Mail Special Delivery to send it to us. It is also recommended that you insure your parcel. If you need more information about how to sell your scrap gold, you can get in touch with us online by visiting our website.
This is a generic question that many precious metal buyers ask. However, it is important to clarify certain key concepts when it comes to discussing the gold price today. Firstly, it is important to not confuse the concept of ‘value of gold items’ with today’s gold price. Investors are often confused when faced with this dilemma. A layperson would be led to believe that the value of a gold item, whatever it may be, can simply be calculated by weighing the gold and multiplying it by today’s gold spot price. However, this is not true.
The value of gold items
Well, it all depends on the gold item that you own. Is it a gold bar? If it is, then we need to check the purity of the gold by looking at the refiner stamp on the bar. The gold price today relates to pure gold, also known as 22-carat gold. If the refiner stamp on your gold bar states that it is 22 carat gold with a purity of 999.9, then today’s price for gold will apply. If, however, the item you own is a piece of jewellery, an artefact or something else, then the gold price today may not apply.
This is simply because of design and making charges for jewellery or other items cannot be recovered. It is also highly likely that the purity of the gold may have been diluted to harden it. This is usually done with the addition of base metals like copper or nickel so that the jewellery can be manufactured without breakages. The malleability of pure gold does not allow it to be fabricated into such items easily.
Today’s gold price
The price of gold today isn’t really a fixed-price. It is a dynamic price that changes every second, whenever the markets are open. The gold market is a global one, and today’s price keeps fluctuating if the gold markets are operational anywhere in the world. So, Asian markets operate at different times when compared to the New York London markets and the price of gold today keeps moving on. Apart from this, the gold markets do not operate during weekends and major international holidays like New Year’s Day.
Finding out the gold price today
Today’s gold price is stated in USD per Troy ounce. Most reputed dealers will have this price published on their websites. You can also find out the gold price today by searching on a search engine. The current gold price is known as the spot price. Currently as I write, the spot price of gold is $1843 per Troy ounce. The Troy ounce is a unit of measure used to weigh precious metals. It is slightly different from the regular ounce. A Troy ounce equals 31.10g, according to the metric system. The regular ounce equals 28.34 g. So, now we understand that today’s gold price is the price in US dollars for 31.10 g of gold.
Premiums over today’s gold price
When buying or selling, another key concept to be aware of is that investors cannot sell or buy exactly at the gold price today. When buying, a small premium needs to be paid over and above the gold price today. When selling, you lose this premium. The premium accounts for dealer margins, manufacturing and designing costs and other logistics.
Find out more about gold prices from Physical Gold
Our gold experts are best placed to advise you on the right price to buy or sell your gold. To benefit from this advice, please call (020) 7060 9992 or drop us a line via our website and we will be in touch with you.
With tensions in Syria reaching boiling point, a few years ago, it hasn’t gone unnoticed that the price of gold had steadily risen at the time as the world prepared for conflict. Since then, a plethora of myriad challenges has hit the world economy. It has now been a long 12 years since the days of 2008 when the world faced its most severe financial crisis.
The US sub-prime housing market collapse triggered off a chain of events that eventually brought global financial institutions down to their knees. The period witnessed the demise of Lehman Bros and a large number of global financial institutions followed suit. But, economists all over the world had hoped that in time, the crisis would dissipate, and the world economy would be buoyant once more.
Ongoing crisis fuels gold price
This was not to be. Instead of a healthy recovery, the global financial markets simply settled into a bearish and sluggish phase that lasted for most of the decade. A change of guard at the helm of the great nations could not provide a viable solution to the problem. On the other hand, geopolitical events around the world continue to queer the pitch for a recovery.
The uncertainty surrounding Brexit and government debt across Europe created a problem. Of course, there was a renewed escalation of conflict in the Middle East, along with the increasing threat of global terrorism that led to greater levels of economic uncertainty. This was further compounded by other factors like the US-China trade war.
At the height of the recession, gold reached its highest ever peak in August 2011, when the spot price of 1 ounce of gold touched $ 1900. This rise was attributed to wary investors moving away from market-linked instruments and hedging their risks by investing in gold. Now, in 2020, we can once again see the spot price rising all the way up and it has already reached above the $1600 mark. Investors are once again depending on the safety of gold.
The reliable safe-haven investment is now technically in a bull run again after gaining more than 20% from its June lows. Tracking the tax-free gold price is essential if you’re to time your entry into the market well and maximise returns.
When is gold tax-free?
Tax regimes can vary dramatically around the world, so we’ll just focus on the tax treatment of gold in the UK. All investment grade gold is VAT exempt, meaning you’ll pay no tax when you buy. To qualify as investment grade, the gold needs to be 22 carats or higher in purity and in the form of a bar or coin. So this instantly discounts the merits of lower grade jewellery, or gold in the form of dust as tax-free gold.
Owning physical gold bars and coins doesn’t produce any dividends like a gold mining share might, so a holder also avoids paying any tax while holding them.
The final piece in the jigsaw is whether any tax will be applicable upon sale – known as Capital Gains Tax (CGT). Generally speaking, any profits you’ve made are liable for CGT once you’ve breached your annual allowance. So, if you sell gold bars or foreign coins such as Krugerrands, you may have to pay CGT.
However, the amazing loophole lies with British coins. Namely UK Britannia and Sovereign gold coins are actually legal tender in the UK. As such, the Treasury can’t tax you on their movement, essentially rendering them CGT free! So if you want to avoid paying tax when buying, holding and selling gold – Sovereign coins are a great place to start.
What influences the tax-free gold price?
There are several variables which contribute to the price of Britannia and Sovereign coins. Firstly, the age and condition of the coins. Generally, brand new coins will trade at a 1-2% premium to circulated coins. In my opinion, older coins offer better value as you’re unlikely to receive the same premium you paid when you come to sell brand new coins.
Secondly, the number of coins you’re looking to purchase will impact the price you pay. Generally speaking, you should benefit from economies of scale with the premium you pay shrinking as you buy more.
Physical gold price affected by supply and demand
The fact that the UK gold coins are real and tangible, rather than simply paper gold like ETFs or mining shares, means that supply and demand will also influence the gold price. If the market experiences high demand and/or restricted supply, then you may find yourself paying higher premiums for the same coins.
Finally, the place from which you source your gold coins will have an impact on price. Buy direct from the Royal Mint and you’ll pay over the odds due to packaging and presentation. However, purchasing from a reputable gold dealer should keep premiums to a minimum.
Where can I track current gold prices?
If you don’t want to have to call a gold dealer every 5 minutes to gauge prices, it’s useful to be able to trace the approximate price on the internet. There is a relatively easy way to do this. Reputed gold dealers will display the current price of gold on their websites.
As you may be aware, the price of gold is a dynamically moving number and is usually reflected on a ticker, which is displayed at the top of the website. The display gets automatically updated every minute. By checking the ticker, you can stay up-to-date with the current price of gold. Also, in today’s day and age, there is an app for just about anything. Several gold apps in the market can also track the price of gold in real-time and keep you updated.
If you’ve already bought gold coins, you may simply want to track their value. While the factors discussed above will determine the exact price, it is possible to estimate its value from the gold spot price. This price moves throughout the day and is fixed twice daily – known as the London fix. These fixes can be found on the LBMA website or the live price with a gold dealer such as Physical Gold Ltd. You can then simply add a premium of between 7-12% to obtain a decent guide to the price of tax-free gold.
Call us for any advice on buying gold
At Physical Gold, we have a specialist team who can advise you on all matters related to the sale and purchase of precious metals. This includes guidance on the price of gold and how to invest in tax-free gold. We are one of the most reputed online precious metal traders in the country. Call our gold experts today on (020) 7060 9992 or simply reach out to us via our website. Our friendly customer service team is always at hand to ensure that you make the right investments when it comes to gold and silver.
February 24th, 2020 saw gold prices surge to a 7 year high. Concerns about a COVID-19 coronavirus global pandemic upset the markets, we investigate reasons for recent events in this latest article.
What is the COVID-19 coronavirus?
The expression “coronavirus” is actually a term used to describe a large family of viruses, which cause a range of conditions ranging from the common cold to more serious illnesses such as MERS and SARS. The virus outbreak in 2020 called the “coronavirus” is actually COVID-19, a new strain of the coronavirus family, which had previously not been known to have infected humans.
Signs to look for with COVID-19 are breathing problems, cough, fever, respiratory problems and shortness of breath. In most cases, the virus is fairly innocuous and only creates mild conditions in the sufferer. More severe complications can lead to acute conditions such as kidney failure, pneumonia, respiratory syndrome and worst-case scenario even death.
Mortality rates are not yet fully known, although the World Health Organisation estimates that between 1-2% of people infected with the virus will die. There is as of the time of writing (25th February 2020) no known vaccine, although research to create a vaccine is being undertaken rapidly around the world.
“An outbreak of a disease that occurs over a wide geographic area and affects an exceptionally high proportion of the population. A pandemic outbreak of a disease.”
Currently, there have been 77,000 cases in China and 1,200 other cases around the world, which are spread over 30 countries. According to the NHS, COVID-19 is a High Consequence Infectious Disease. Although, seen as a lower-mortality rate than SARS and previous viruses it is the infectiousness of COVID-19 that makes a pandemic likely. The virus spreads itself mainly through the air but also can spread through bodily contact.
Reasons why the COVID-19 coronavirus outbreak is likely to increase gold prices
Now what you may be wondering will the impact of COVID-19 have upon gold and other precious metal prices? We summarise some of the main impacts below:
Avoid risk and losses/investment channel switch – many investors will simply “ditch” some forms of investments (e.g. stocks and currency) and move to precious metals until the risk is reduced/eliminated
Mitigate market uncertainty – investors are likely to have a balanced portfolio of investments. To mitigate market risks, investors are likely to switch at least a proportion of their portfolio into safe haven investments such as gold and silver
The recent surge in gold prices
On February 24th, the Dow Jones Index fell 3.5%, the UK FTSE fell 3.3% and the Milan stock market fell 6% (mainly because Italy had a large outbreak). These wiped out an entire year’s worth of index gain on the Dow Jones in just one day. Companies with high exposure to China (Disney, Nike and Apple) and travel companies were most affected with EasyJet falling 16.7% in one day and British Airways falling in price.
As shares are sold, generally investors will look for an alternative asset-class to invest their funds into (typically safe havens). Conversely to shares, gold prices hit a 7-year high on February 24th 2020. The reasons for this price rise are multi-faceted (as changes in gold price always are) but undoubtedly an underlying tension about the possible global economic impact of COVID-19 is the main factor.
Most Analysts believe that gold prices will continue to rise, particularly in the short to medium-term. Investors are currently moving out of stocks/shares and currencies and investing in safe haven assets such as gold and silver.
It proves once again that investors value the tangibility of gold and at times of economic uncertainty, investors value investments they can “feel and touch”, especially ones which can be used as a highly liquid alternative form of currency to traditional cash.
Buy gold and silver as a safe haven investment from Physical Gold Limited
The team at Physical Gold have vast experience in precious metals trading. Check our About Us page to view our accreditations and trade memberships.
Call us today on 020 7060 9992 or email us to contact the team. We can speak about your current circumstances and suggest the best gold/silver investment strategies to meet your needs.
This video focusses on the gold price. In particular, many investors new to the market, struggle to understand how the gold price works, what moves it and how to calculate prices of physical gold coins and bars.
My aim today is to walk you through some of the basics so you’re better equipped to understand the gold market and profit from it. In particular, I’ll explain 2 crucial concepts.
Concept 1: The price moves constantly
The most important concept to understand is that the gold price is fluid. While the market is open, the price moves constantly. The market closes for only a few hours each day between New York closing and Asia opening. It’s closed at weekends and a small handful of major holidays like New Year.
The gold price is quoted in US Dollars per ounce and generally then converted to grams and other currencies. So if you need to calculate the price per gram in Sterling, you’ll first need to divide the $ price per ounce by 31.103, then apply the exchange rate. Many gold dealer websites, including our own, will already quote the price in ounces in Sterling terms.
Concept 2: The spot price isn’t where you can buy or sell gold
The price you see quoted as the gold price per ounce,
is known as the spot price of gold. Despite many assuming this is the price where gold can be bought and sold, it actually only acts as a benchmark from which to start.
Regardless of whether you’re looking to trade gold ETFs, buy a few gold coins or are a central bank moving tonnes of gold bars, the price at which these trades are done will be based on the spot price plus a premium.
Type of gold impacts price
This premium will depend on the type of gold investment and quantity. Generally speaking, you can buy gold electronically at a level nearer to spot price than if you opt to buy physical gold. This is because real gold incurs production, design and delivery costs. The second rule of thumb is that the larger quantity you buy at any one time, the lower the premium you achieve. Finally, older coins will trade at larger margins over the spot price of gold due to it’s historical and rarity value.
Hopefully, that’s shed some light on understanding the gold price per ounce. If you found this video helpful, please view our full array of video tutorials covering a wide number of gold and silver aspects.
Buy and sell gold at the best prices with Physical Gold Ltd
All our gold coins and bars can be bought at the live prices, which are updated on our website every 60 seconds. That way, you can track their prices and try to time your purchase or sale optimally and rest-assured you’re getting the most up-to-date pricing.
If you need any help setting up an account, buying or selling gold, or simply need some guidance, then please call our team on 020 7060 9992.
The gold to silver price ratio has historically been an important factor that influences buying decisions taken by investors when investing in precious metals. There are a few factors that drive investors to buy gold or silver. Most investors do not consider investing in gold or silver in isolation. It is usually a decision taken as a part of a concerted strategy to invest in asset classes that minimise risk and maximise gains for the investor. In doing so, an investor who is creating a portfolio of investments to build wealth over the long term will have an investment window of at least six to ten years to remain invested in certain asset classes.
Understanding precious metal investments
Like a palette of paints available to the painter, the investor uses several asset classes to construct a diversified portfolio. These asset classes could consist of equity funds, debt funds, direct equity, bonds, real estate, cash deposits and precious metals, to name a few. There are many views on how much investment should be allocated to precious metals during an asset allocation exercise. Many investment advisors recommend an allocation of 10 to 15% within a portfolio. However, there are a few compelling reasons for investors to invest in gold and silver.
Gold and silver investments during market crises
Investors often use precious metals as a hedge against market forces. Gold is a popular choice to hedge against both inflation, as well as interest rates. On the other hand, we often see investors flocking to buy gold or silver when capital markets take a plunge globally. In recent times, the 2008 financial crisis and 2011. This was evident during the 2011 financial crisis when global capital markets crashed due to S&Ps downgrade of the US economy. The market crash prompted investors to move their money away from stock markets, and invest in gold. On August 22, 2011, the spot price of gold touched a record $1,900.
Situations like these simply mean that prices of gold have surged out of control due to astronomically high market demand. During a time like this, if silver prices did not respond adequately to the shift in the market, the gold-silver price ratio would rise and the spread would widen. But this is not the case. Trends show us that the spread falls. For example, the current ratio of gold to silver is around 75: 1. This means that gold is 75 times dearer than silver. It would take 75 ounces of silver to purchase 1 ounce of gold. Now, if the price of gold continued to rise unabated, without a proportional rise in silver prices, the gold-silver price ratio would surge upward, as gold would then become several times dearer than it is now when compared to silver.
An inverse relationship
However, it is important to note that when precious metals enter a bull market phase, silver usually outperforms gold. Since silver is more affordable, demand for it remains higher, driving the prices of silver higher. In recent years, silver price movements are not dependent only on investor demand. Industrial demand and scanty supplies have been pushing silver prices up. When this happens, the gold-silver spread or the difference between the prices of the two metals reduces, and the ratio falls. A look at the 20-year gold-silver ratio tells us that in 2011 when gold prices were at their highest, the gold-silver ratio fell to a record low of 30.48. On August 22, 2011, silver rose to more than $42 per ounce from a low of around $28 on 1st February 2011. This was the same date when gold touched its record high.
In 2016, gold prices were above $1400 an ounce, and the gold-silver price ratio was around 65. A close look at 2011 shows us that the price curve of silver outperformed against gold during that period. Therefore, we can say that the gold-silver price ratio has an inverse relationship with market rises. As a gold or silver investor, it is important to understand this relationship and explore the drivers responsible for the rise and fall in gold and silver prices.
Call our precious metals experts to find out more about market trends
At Physical Gold, our investment advisors do not give you tips on how to time the market. We believe that investments in precious metals are best done by understanding the fundamentals of the market and making an educated decision on when and how to invest. Call us now on 020 7060 9992 or get in touch with our team online to find out more about price movements in the gold and silver markets.
The price of gold is calculated as spot prices per troy ounce. Spot prices are live prices of commodities at a particular point in time. Needless to say, they fluctuate all the time, responding to different market forces. They do not necessarily respond only to market forces and investor sentiment. The spot price of gold is extremely sensitive to geopolitical pressures, political climate, international current affairs and macroeconomic forces. Money is known to run away from where there are fears. Similarly, investors often invest in gold to hedge against risks in the international capital markets.
Prices of gold – 1998 to 2008
In 1998, the price of gold closed at $288.70 per ounce. There was political upheaval at the time in America, with the impeachment of President Clinton. The current spot price of gold stands at around $1,328.3. This means that gold prices have gone up almost 5 times in the last 20 years. When we look carefully at those price charts, we can see that the big jumps are in 2002 (23.96% increase), up to $342.75. The following year, 2003 again saw prices going up to $417.25 (21.74% increase). With prices steady over the next couple of years, the next big hike came in 2005 (17.77%), as the price went up to $513. Gold went on a rally from here for the next two years, and 2006 and 2007 saw gold prices skyrocket to $635.70 and $836.50 respectively. So, at this point in time, gold was up by almost 3 times, within a ten year period.
Before we move on, let’s try to understand what the drivers of these prices were at the time. By digging deeper we find that there was a global recession in the early 2000s, which contributed to the exodus of investors from other investment classes, to the safe haven of gold. In the US, the NASDAQ crashed, signalling the end of the dot-com bubble. The NASDAQ peaked on March 10, 2000, and right at that peak, several big high-tech companies placed sell orders on their stocks, triggering a panic response. The fundamentals of the US stock markets at the time were not robust enough to take the hit and the SEC had not put in place checks and balances to contain large-scale damage. As we have previously discussed, investors simply sold their stocks and ended up buying gold in order to hedge against the volatility in the markets.
The impact of 09/11
The following year, 2001 was a fateful year for the US economy. The terrorist attacks on the World Trade Centre permanently affected the American economy. The stock markets remained closed for four days at the time of the attacks, and when they re-opened, the Dow Jones average registered its largest plunge of all time – 684.71 points in a single day. Almost $1.4 trillion was lost in around a week and portfolios, pension funds and retirement funds were all eroded in one clean sweep.
These events created terror in the heart of investors and the period following the attacks saw the US dollar weakening, rise of government spending, fear of further terrorist attacks in the markets, as well as changes to the government’s fiscal and monetary policies. Government debt in the US skyrocketed during this period, as the country spent huge amounts to beef up homeland security and entered into expensive wars against Afghanistan and Iraq. At the end of that period, the US government debt stood at a staggering $14 trillion by 2011, further weakening the dollar. As a result, there was a huge exit of institutional, high net-worth and retail investors from the stocks and bond markets, as they all turned to gold for safety. The price of gold bullion shot up instantly, and so it was that from a spot price of $285 per troy ounce on September 11, 2001, prices reached $1,820 per ounce on September 11, 2011.
The 2008 financial crisis and its impact on the next ten years
More bad news appeared on the horizon in 2008 as the US sub-prime mortgage crisis erupted, dragging in investors across Europe and the Americas. As the repackaged junk bonds failed to pay out, entire banks fell across the western world, including Lehman Brothers and Northern Rock. Yet again, investors turned to gold in order to insulate their investments against market uncertainty.
By 2012, gold prices had climbed to $1,664 per ounce, and investors who had moved to gold earlier on were enjoying good returns. However, the prices of gold fell by 28% in 2013 to $1204.50 per ounce while it should have continued to rise. During this period, other asset classes like real estate and equities rose quickly at double-digit rates. Although inflation was up, and typically gold is used as a hedge against inflation, gold prices continued to fall and there could be two interpretations for this phenomenon. The resurgence in real estate and equities saw some investors going back to these asset classes and pulling out of gold.
The other rationale could be that the paper gold market and Exchange Traded Funds (ETFs) continued to grow in leaps and bounds. In fact, the paper gold market is 92 times bigger than the physical gold market but does not translate into real purchases of gold. Each investor believes that the certificate he/she holds is backed by that many ounces of gold held by the issuer. However, the reality is that 92 other people have also been sold that same ounce of gold. So, while paper ETFs are on the rise, it does not translate into the same volume of gold demand. The current price of gold is $1,324 per ounce and once again, as the storm clouds of uncertainty loom ahead, investors are turning to gold.
Call us to discuss the right time for you to invest in gold
Is the time right for gold and silver investing? It’s true that, at first glance, when looking at the historical price charts for gold and silver, they can look like a bit of a rollercoaster. This might lead you to believe that gold will never reach the dizzying heights it once did.
The price of gold reached its highest point in 2012 when it soared to a record high of £1,200 per ounce. The picture for silver investing is similar to current prices much lower than at its peak. This means the current levels of both metals offers great value. No-one should want to buy at or even close to the all-time high. Current prices for gold are around 20% better value than at its height, with silver an astonishing 60% cheaper.
You can view graphs illustrating past performance over various timescales, by clicking here. They make fascinating reading, though we would always stress that they should be considered in context and not in isolation.
2016 saw both the gold and silver prices record around 30% gains by year-end. And although it might not yet have reached the heights of 2012, gold enjoyed a continuous upwards trend, hitting a top point of £1,050 per ounce in July of that year. In Q1, The World Gold Council reported gold demand was up 21% to 1289.8 tonnes – the second strongest quarter on record. First-half gold demand was up 18% – the second strongest on record – with gold investment accounting for almost half of that demand.
Silver also went from strength to strength, reaching its highest price since January 2015. The US Federal Reserve’s decision not to change interest rates, together with no indication as to when they might raise them, encouraged people towards investing in gold and silver.
More subdued gains in 2017
Precious metals enthusiasts saw more modest gains the following year. Starting the year at £935/oz gold finished the year around 2.5% up at £960. During those two points, it spends 3 periods north of the £1,000 mark, peaking in September at £1,030. This coincided with a strong performance in the stock markets with the FTSE 100 rising 7.5% and the Dow Jones an incredible 24%. Generally, when stock markets perform so well, gold has the least interest and its price suffers the most. So it’s encouraging in the grand scheme of a balanced portfolio that gold still returned around the inflation rate during such a period.
What can we learn from that?
This demonstrates that while gold can act as portfolio insurance during economic downturns (usually appreciating by double digits), it still can act as a store of wealth in other years too. With cash deposits still paying well below the inflation rate in 2018, this simple achievement for gold shouldn’t be sniffed at. Essentially owning gold should be a long term strategy, as returns (and potential losses) can vary greatly from year to year. Trying to second guess the market and predict the performance is futile and relying on extreme luck at best. It’s always tempting to sell everything and only buy the investment that is performing the best at that time, in a hope to ride the gravy train. However, this strategy leaves you vulnerable to being hopelessly exposed to market corrections and change. Owning some gold along with stocks, bonds, cash and property, enables balance and more predictability.
….and silver? Has Bitcoin taken its mantle?
Silver experienced a poor year in 2017 with losses of around 3.5%. Some feel the price is being manipulated downwards by the huge banks which are looking to load up on the metal. If so, the price will inevitably bounce back with a vengeance when the banks want their holdings to increase in value. An alternative is that with stocks performing well under the new Trump administration and cryptocurrencies making millionaires seemingly overnight, silver simply hasn’t had a look in. Many have switched their attention from bullion to bitcoin. With the silver price so low and its huge potential for quick gains, it’s certainly been viewed as the exciting and go-to investment for those seeking significant price rises. With the likes of Bitcoin achieving this on a steroid level, the short term greed has switched all the attention away from silver.
Will silver regain its shine instead of Cryptocurrencies?
However, as we now know in 2018, cryptocurrencies are incredibly volatile, on the downside as well as the upside. For the novice investor whose head has been turned by tales of instant wealth, there are now almost as many stories of overnight bankruptcy caused by incredible price drops for bitcoin. This period (after their initial glamorous price growth) will likely sort the wheat from the chaff. Naive investors will perhaps start to reconsider the value of cryptos, deciding either that they’ve now missed the boat, or that the risk of complete loss is too great. For the more travelled investor, they already know that investing in cryptocurrencies is similar to betting red or black in the casino. There is simply nothing tangible behind their value, and while the blockchain technology has its merits and will no doubt perform a critical role in our futures, getting rich overnight from Bitcoin could be over.
For savvy investors seeking large gains, they’ll know that while silver and cryptos can be grouped as higher risk, higher gain asset classes, they are almost opposites. While the likes of Bitcoin may have no tangible or intrinsic value, silver is a physical precious metal. Its value can never fall to zero like Bitcoin and its value is backed by something tangible that not only can be used as currency but also has vast industrial uses especially in the technology sector. For this reason, the investors left standing after the inevitable Bitcoin massacre will no doubt seek out silver once again as the go-to sexy investment.
Current silver and gold value represent a great opportunity and potential
2018 has started in a rather dull fashion for precious metals. Prices are still around 20% below their historical peak, so it’s still a very good time to invest in both gold and silver. It just goes to underline that it’s a lucrative opportunity, with room for growth and the possibility of sharp spikes. As of March, returns for the year have been virtually flat for gold and 7% down for silver. Combined with last year’s silver price squeeze, it’s now looking like incredible value. It’s the ratio to gold, which averages 47:1 over the past century, now stands at a staggering 80:1. Surely silver investing offers vast upside potential.
Crucially, the influential factors which tend to increase the demand for precious metals, are still very much in place. Global markets continue to be unstable, rumours of another banking crisis persist and a housing market slowdown has already started. Combine this with heightened terror threats and rising demand from Central Banks for gold, and it’s easy to understand why the precious metals market still has plenty of wind in its sails.
The calm before the stock market storm
Stock markets have now enjoyed nearly a decade of
uninterrupted growth since the 2008 credit crisis. Recently the Dow Jones has received further boosts from the Trump administration. It’s tempting to leave as much money in stocks while they’re doing well as possible. Especially while precious metals are taking a breather. However, every market analyst will agree that a simple glance at historical performance will tell us that equity market bull runs cannot and do not continue forever. More pertinently, the most severe market crashes come after the longest a strongest bull runs, which inevitably fuel an inflating bubble. This is similar to the fact that San Francisco sits plumb on the San Andreas fault line. A glance at historical earthquakes will tell us that with the constant movement of the earth’s crust, further events are not only likely but guaranteed. It’s a case of when not if there will be another huge earthquake. Not only that, but when San Francisco is overdue a quake, just like the stock markets are now overdue a correction, then the expected magnitude of that impact is far greater.
Maybe I can simply leave all my cash in stocks and switch to gold when that happens?
The best policy is not to try and predict the future, as that’s just witchcraft! Instead, we should learn from the past and understand that just like the earth, the markets are constantly moving and predicting the moment of a big eruption is impossible. We’d suggest leaving money in stocks (even after they do fall dramatically as you won’t want to miss out on the recovery, however long that takes). However, we’d also insist on owning some physical gold and silver too. The most prudent strategy with timing when to buy precious metals is simply to buy now and wait. As long as you allocate a healthy percentage of your assets into the likes of gold, then you’ll be protected when the markets do crash. My little saying is that I’d rather own gold 6 months, or even 2 years before the market crash, than a day after. Because then it would be too late.
What else could push gold and silver up this year and next?
It’s not only the stock market which is vulnerable. There’s plenty of other elements in the mix which are either brushed under the carpet by authorities or simply under-estimated.
Interest rates and housing market
After an extended period of record low-interest rates
in most of the globe’s major economies, we’re now starting to emerge into a new phase. Base rates have already risen in the UK and are predicted to continue rising in 2018 from May onwards. Rates in the US have also been rising, at a slightly faster rate. Rhetoric from central banks is that increases will be modest. However, the huge danger is the impact even small increases could have on the average man in the street. In a period of incredibly low or even negative wage growth, one of the few areas that have papered over the cracks has been property. With house prices seemingly on an unstoppable journey to the stars, the property-obsessed UK public felt comfort knowing their prize asset was at least rising in value. With interest rates near to zero, borrowing has been super cheap. So most of us have re-mortgaged, unlocking vast fortunes to fuel either extravagant lifestyles, or at least pay for the bills during lean periods. This increased leverage now leaves us vulnerable to the very interest rate rises we’re seeing now. When the starting point is as low as its been (0.25%), it only takes modest base rate increases to have a huge impact on our monthly mortgage cost, especially when cushy fixed intro rate mortgages periods come to an end. Check out our investigation into the relationship between interest rates and the price of gold and silver.
…and the housing market has softened
Not only are our monthly mortgage costs increasing, but the value of our property has stopped rising, and started to fall. This is a consequence not only of the international market struggling, with wealthy Chinese and Russians previously fuelling UK price growth, but also over the swingeing tax increases brought in by the current Government which has increased stamp duty so dramatically. We expect that firstly, more house owners will fail to pay their mortgages as interest rates rise, leading to more downward pressure on house values. For those who do manage to survive as costs increase, they will have less disposable income (with wage predictions stagnant), which will impact the high street and service sector, further crimping stock markets. Higher interest rates also mean higher new borrowing costs, which deters investment in corporate growth. All this will put even more pressure on the already unaffordable rental market. It’s common to compare gold investment versus property, but both should play crucial roles in a balanced portfolio.
UK consumer credit bubble
With the pressures of interest rate and mortgage rises, the public’s other debts will also come under pressure. Two particular concerns are the car market and credit card sectors. Both industries are enjoying record high borrowing. However, as lenders feel the squeeze from higher rates and more defaults, we’re likely to see stricter borrowing requirements and higher rate deals. A record number of UK borrowers are currently on zero per cent credit card deals which are likely to begin to reduce in availability. People will then struggle to refinance their debt at anywhere near the levels they’ve been used to. In the automotive industry, a growing trend has been for leasing cars. Whether on outright monthly lease deals or borrowing with a balloon payment at the end, many drivers will struggle to continue financing their car. Certainly, the hunger for new cars every 2 to 3 years will likely diminish.
The technological age is slowing crushing the high street
Early 2018 has brought with it fresh casualties of the ever-growing high street demise. Toys R Us and Maplin have both gone into administration, while seemingly popular food chains, Prezzo and Jamie’s Diners are closing a large number of restaurants. Perhaps this doesn’t come as a surprise. You could argue that Maplin has always been incongruous and never really had mass appeal. While kids love the experience of Toys R Us, adults who buy the games are now far more likely to order from Amazon and benefit from lower prices and next day delivery. Either way, this trend of weeding out the weak, however large the company, is likely to continue as the public turn their back on the high street and embrace online shopping. The frightening consequence is the sheer loss of long term jobs. Automation is filling the role of so many which will have a long term negative impact on an already growing population. Read our blog on the future of gold in a cashless society.
Brexit, Trump and Russia
There isn’t enough time to cover every simmering possible global issue which could push gold and silver prices skywards. But certainly, a handful of other significant issues would be the ongoing threat to the UK from Brexit. Whether this has a direct impact on our economy, a slower longer-term influence or is simply negative to Sterling, this is one which will stay on the radar for a while to come.
Donald Trump hasn’t blown up the world yet, but who knows about tomorrow! None of us would be shocked if he develops his trade war with China, instigates a war with the likes of North Korea, or simply makes some terrible domestic decisions in the world’s biggest economy. Either way, in today’s ultra globalised economy, foreign issues have more impact on the UK than ever.
The recent tensions between Russia and the UK after the poisoning accusations could be a storm in a teacup. However, the Government’s strong condemnation of Russia suggests there could be a hidden agenda. With Putin now flexing his muscles, I’d rather own gold right now to provide diversification, just in case this escalates (especially as Russia have been stockpiling gold aggressively themselves over the past few years).
Long term view for gold and silver investing
The value of gold and silver may be volatile, but owning them as part of a portfolio reduces your overall personal volatility. They tend to act as a balance to the traditional paper assets (like stocks and shares), so when those markets fall, physical gold and silver have historically risen. The motivation for many gold & silver investors aren’t necessarily to time the market perfectly; instead, it’s to take a long term view to provide balance and protection to their overall wealth. This way, exact timing isn’t important, as the long-term hold should outperform any short-term price drops and still deliver portfolio insurance.
If you’re still unsure and concerned about timing, then our ‘Monthly Saver’ enables you to purchase regularly. You can set up to automatically buy a small quantity of gold or silver every month. This means that if the price does decrease from one month to the next, it benefits you, as your next purchase would be at a lower rate.
Over time, you buy each month at the various underlying prices, therefore averaging out the cost of your precious metals. It’s a great way to get started in gold and silver investing.
The main message is that it’s necessary to take the long-term view. As with any investment, prices will go up and down, but as these graphs illustrate, the rewards can be well worth it. If you’d like to find out more about this type of investment, why not Download our free guide to investing in gold and silver. We maintain gold and silver are still very good value and worth their weight in, well… gold and silver!
It has long been a widespread belief that interest rates have a significant impact on the prices of gold and silver. On the face of it, this would appear to be true. If interest rates were to rise, then it would make sense that the appeal of bonds and savings accounts should go up and demand for physical assets go down. In reality, however, there is no real statistical evidence to support this. This is because there are many other factors that drive the prices of gold and silver.
Correlation between interest rates and prices of gold/silver
Whilst there is some level of correlation between interest rates and the prices of gold and silver, it is not enough to say for definite whether rising interest rates have a positive or negative effect. Over the last 50 years, the correlation between interest rates and the price of gold has only been at around 28%.
Rising interest rates have also been shown to have a bullish effect on precious metals in recent times, a complete contradiction to what precious metals experts have been telling us for years. Last year, for example, the prices of gold and silver rallied significantly after the federal reserve announced an increase in interest rates. One of the reasons for this is that gold and silver markets predominantly operate on investors’ expectations for the future.
If investors foresee that interest rates might rise, then the prices of gold and silver may drop a long time before the changes in interest rates are actually introduced. After interest rates have risen there may actually be a bounce in gold and silver prices as investors look to hedge their bets for the future. According to recent statistics, the chance of gold prices being higher 12 months after a Fed hike is 61%.
That’s not all
Precious metals are also purchased by many investors as a hedge against inflation. They, therefore, make quite timely investments when purchased during the course of a rate-hike cycle. Hyper-inflation in countries like Venezuela is likely to drive citizens of the country to invest their cash savings in commodities that will hold their value like gold and silver. This serves as a warning to everyone to keep an eye on the direction of inflation in their own countries as what appears to be relatively stable conditions can change quickly if confidence turns.
Other factors influencing gold and silver prices
The main reason that interest rates do not tend to have a significant impact on the price of precious metals, is that there are many other factors normally involved. Investors buy gold and silver for all sorts of different reasons. They may invest in precious metals as a response to potential economic and geopolitical risks for example. After Brexit demand for gold and silver went through the roof as people were worried about the country’s economic future and how potential trade links with the rest of Europe would be affected. This uncertainty meant that people didn’t trust the markets as much as they would have normally and so investing in physical assets represented a viable alternative as well as a way to protect their wealth in the event of a market crash. Other geopolitical factors such as Trump’s administration in the US have also had an effect on gold and silver prices.
Learn more in our YouTube video – “The Gold price today & investing in gold medium to long term”
Another factor that has a big influence on gold and silver prices is the performance of the stock market. If the stock market is underperforming or has declined significantly then one of the first investments people tend to turn to is silver or gold.
Silver has a wide variety of industrial uses which means its price isn’t always affected by the same factors that influence gold. Due to its heavy industrial use, silver prices can also be influenced by a wide range of other economic forces, depending on how other markets are performing.
The market for precious metals has underperformed throughout 2017. Big things were expected from gold and silver this year and despite performing strongly early on, they didn’t reach the heights that were expected. Both gold and silver have picked up recently but overall it has been a relatively disappointing year for precious metals.
Metals expected to perform well in 2018
Despite a relatively underwhelming year from most precious metals, one metal that has performed particularly well is Palladium. This year prices for Palladium overtook platinum for the first time since 2001. Of course, there are no guarantees that Palladium will continue to perform well next year, however there are a lot of good indications. For one, production of Palladium is said to be in decline, particularly in Russia who currently produce around 41% of the world’s supply. As it stands Palladium is roughly 15 times rarer than its sister metal platinum, and around 30 times rarer than Gold. Other than Russia other large producers of palladium include South Africa and Zimbabwe.
There has also been an increase in the demand for Palladium from the car industry. This is due to consumers switching from diesel back to petrol cars amid government emissions warnings. Palladium is primarily used in catalytic converters for petrol cars helping to turn toxic gases and fumes into less harmful pollutants. The increase in demand for palladium is likely to continue into 2018 and whilst the emergence of electric cars could be a potential threat to the Palladium industry, we are still a long way off seeing electric cars becoming a proper rival to petrol.
Silver has had an indifferent year throughout much of 2017, however a lot of experts are predicting big things for the precious silver metal market in 2018. Currently the price of silver is relatively low despite a massive increase in demand across many industries, particularly solar energy. Production of silver is also on the decline and many people are predicting a big rise in its value if demand continues to outweigh production.
Gold was expected to perform extremely well this year but so far this hasn’t really been the case. Despite prices rising early in the year, gold prices have stayed fairly stable. With Interest rates in the /US expected to rise, gold is likely to take a hit early on in 2018 but many experts predict the metal will come back strongly towards the latter half of 2018 with prices expected to rise considerably.
Geo-political tensions and their effect on the market for precious metals
In times of political uncertainty, prices for precious metals – particularly
gold and silver, often tend to rise. This is because people are keen to store their wealth in tangible assets in the event that there should be a drop in the market. When prices for both gold and silver rose in 2017 it was generally due to geopolitical tensions such as Trump’s Inauguration and elections in Europe.
Looking ahead to 2018 there are several potential issues that could continue to cause economic instability. Brexit negotiations are still on-going which could potentially cause political conflict in Europe, although most of the cards are already on the table at this stage. Trump’s administration however, could still prove to be very volatile. US relations with Iran and North Korea are also very much in the balance and should things escalate then the economy may be affected. With so many global conflicts of interest still in the balance, our experts at Physical Gold are predicting a strong year for precious metals in 2018 as people look to store their wealth outside of the traditional system.
Purchase gold and silver with Physical Gold
For more up-to-date information and news on the precious metal industry, please visit our blog. If you wish to speak to us about how to invest in gold and silver, please call us on 020 7060 9992.
Recent days have seen the gold price rise to 2-month highs as markets desperately seek a safe haven from mounting geopolitical tensions.
Only a couple of weeks ago, the summer holidays were in full swing and the gold market settling into a slumber, ready to awaken for Autumn. However, in a matter of days, the market has sparked back into life. Initially moving up on the back of downgraded UK growth forecasts, then propelled further as gesturing from the Korean peninsula and President Trump reached new highs (or lows, depending on your view!). This is a classic example of how it’s never easy to anticipate such market events. Even in the depths of a summer slumber, the world can change overnight. This supports our notion that you should look to add gold to your portfolio ASAP as part of an overall balanced strategy, and then you’re prepared for any outcome. Reacting to a huge event by adding gold afterwards is usually too late.
In a response to North Korea’s nuclear weapons program, the UN Security Council passed a new series of sanctions on Pyongyang last weekend. This followed the latest intercontinental missile tests from Kim Jong Un. The idea behind the new tougher sanctions is to cut off up to a third of the country’s export business, strangulating the funding for the nuclear project. However, the nature of North Korea’s leader has meant previous sanctions have failed to bring North Korea to the negotiating table, and if anything has made them more determined to push ahead with the program. China and Russia, two major trade partners with North Korea have supported the new sanctions.
A War of Words
With President Trump now firmly in his new seat, his muscle-flexing is surpassing anyone’s expectations.
Trump’s bullish promise of releasing ‘fire and fury like the world has never seen’ if North Korea continue to threaten the US only provided encouragement for Kim Jong-un to retaliate. Recent US intelligence confirmed the regime had been successful in creating nuclear warheads small enough to fit into ballistic missiles. After denouncing Trump’s comments, North Korea revealed plans to fire missiles towards the US Pacific territory of Guam, where they have 6,000 service personnel at a base in the north as soon as the middle of August.
This threat has put the world on red alert. The US responded by warning this would spell the end of the current regime in North Korea, with US Defence Secretary Jim Mattis suggesting North Korea would be ‘grossly overmatched’ in any conflict.
While most of us don’t want to contemplate financial affairs during the holiday season, it seems that macro events may well force our hand. Infact, we’ve seen more first time buyers this year than ever before as the realisation of a brave new world hits home.
As well as the political tensions in Korea, economic instability over the medium term seems likely to further support gold and undermine stocks. Coverage of Brexit has managed to push some of the real concerns under the radar. The Pound weakened last week when the UK’s Monetary Policy Committee announced lower growth forecasts and poor a wage outlook. Concerns increase about a growing debt bubble in the UK with car leasing debt at all-time highs and credit card debt coming under pressure from maturing zero-interest offers. With interest rates on the rise in the US, that may put pressure on others to follow. With rates at historical lows, it doesn’t take too much of a rise to increasing mortgage payments by a high percentage. This all combines with continental hardship which hasn’t recovered much from the financial crisis of the past decade, and recently we’ve seen both French and German banks requiring Government support.
All this uncertainty and instability could push the gold price higher, especially if the Pound comes under further pressure.
With UK coins being completely tax-free, buying Sovereigns and Britannias can act as a hedge against political and economic unrest. Adding gold bullion to your SIPP can provide balance and peace of mind to your long-term savings plans.