Dear Reader,

There is nothing normal about this week’s gold price.  Down 6.12% or £64.08 per ounce. Which means it might be a good time to buy. The month’s high was £1065.83. The month’s low was £966.90 and it’s now sitting just above that at £983.78.  I do wonder if it won’t go lower over the next few months. It’s always hard to spot a bottom, although I’m sure there are those with charts who get it closer to right more of the time.  If you bought in 2015 it’s all semantics. But if you’re looking to buy or to increase your holding in Gold and Silver bars and coins once again, we recommend keeping an eye on the price and giving one of the Bleyer team a call. Don’t forget Gold can be purchased and held in your pension pot too.

The Silver price is down a slightly lesser percentage slip of 4.6% and, to be honest, both charts look predictably “unnatural” in a market that “should” be led by supply and demand. But, like we say, buying physical on the paper-certificate-price dips makes sense:

“The precious metal was trading at around $1,224 this morning in London, relatively unchanged from its opening price on Monday. It’s still down almost nine per cent from its high of $1,337 an ounce in the immediate aftermath of the US presidential election when Donald Trump’s victory sent shock waves around financial markets.

NAB analyst Vyanne Lai told Reuters that “given such a sharp drop” the fall in the gold price was likely to be “cushioned” by an increase in physical bargain-buying.” 

There is one economic line of reasoning, however: “Trump’s win has sparked speculation of a surge in inflation on the back of a big boost to infrastructure spending, which could prompt a more rapid increase in interest rates – hence gold’s surprise slump in recent sessions.” (The Week, 15th November 2016)  

Janet Yellen, the Chair of the U.S. Federal Reserve will give an announcement tomorrow (Thursday) on whether they will raise interest rates. If they do, the general average “stock market view” is that gold doesn’t offer such a great investment during rising interest rates due to not offering interest itself. This is somewhat of a misnomer, as isn’t interest rate just a message of how much profit one hopes to make from one’s money? And if so, Gold’s “interest rate” (or price increase) since last year has been a savings-account shattering 39.68%! Silver outdid her big shiny brother, as she often does in the big price movements, to increase a delightful 45.97%.

So, no, Gold and Silver don’t offer interest rate rises. But I can’t remember ever walking past a bank and seeing a poster in the window offering me increases on my flexible investment even above 5%, let alone between 39% – 45%.

Two caveats to mention. As all our readers are aware, the price of Gold and Silver can go down as well as up. Secondly, silver attracts V.A.T. at 20% but Bleyer can offer clients a variety of coins and bars at Low V.A.T. or V.A.T. paid Silver. If you haven’t ventured into this excellent way of purchasing your Silver do visit Bleyer’s special website section here

In addition, once inflation rises too rapidly, then Gold historically does solidly during rapid or hyper-inflation, usually keeping one’s wealth or buying power in line with sky high inflation. So, it might be worth watching for a further dip in Gold prices in order to buy in more bars and coins in response to tomorrow’s news.

So, a U.S. interest rate rise is one sign of which to be cognizant. Another is our own inflation:

“UK inflation is set to quadruple to about 4 per cent in the second half of 2017, according to a think tank estimate.The rise in prices will “accelerate rapidly” during next year due to the fall in sterling, says the National Institute for Economic and Social Research, revising up the figure from 3 per cent it forecast in August. The last time the UK CPI hit 4 per cent was in 2011. In September the index rose to 1 per cent in September jumping to a two year high and up from 0.6 per cent in August, according to the ONS. The main upward contributors were rising prices for clothing, overnight hotel stays and motor fuel.” (Money Marketing, 2nd November 2016)

I’m always wary when I read that a certain opinion was thought up by a “think-tank.” It can have a flavour of Orwellian double-speak about it, as if every day people don’t think for ourselves, whilst we’re collecting our real-life experiences of how the world works, researching the economic news and managing our own money. However, for the sake of investigative argument let’s examine what and how people in a “think-tank” think:

“The ONS says the increase in producer price inflation over recent months can be “partly attributed to the changes in the sterling exchange rate”. The Bank of England will publish its quarterly inflation report on Thursday where it is expected to raise its forecasts for inflation. NIESR head of macroeconomic modelling and forecasting Simon Kirby says the drop in sterling had been the most striking feature of the economic landscape since the EU referendum.”

Firstly, it is worth noting that the blame for any predicted increase in inflation is unashamedly put on Brexit. 

Secondly, it is worth nothing that the Bank of England can more easily appear to be meeting their inflation target if inflation statistics rise.

Thirdly, it is therefore acutely worth noting that the Office of National Statistics (ONS) has last week changed the way it will measure inflation. They will now include housing expenses such as mortgages, rents, home insurance and estate agent fees. This means their inflation statistics will go up next year, even without anything really going up in the real world. And yet, the predicted rise is being blamed entirely on Brexit. That’s a little creative. 

Fourthly, this new method of “measuring inflation” called CPIH “lost its status as a “national statistic” due to a string of errors and conceptual difficulties in gauging rent changes in the private sector.” (International Business Times, 15th November 2016). It lost its status of reliability back in 2014 and hasn’t re-gained it since.

Fifthly, listen to the exact words of the ONS director on their reasoning for changing the way they are measuring and predicting our economy conveniently in the months following Brexit:

“From our point of view we want to signal what we think is the best measure,” he said. “We are certainly not alone in using this among statistics offices around the world. We think it’s the best measure.” (International Business Times, 15th November 2016)

Imagine if we used such language and changing goal posts in our own daily lives, in our businesses or at the super market while paying for our weekly shopping; “Excuse me, from my point of view I want to signal what I think is the best measure of this £10 note. I think it’s the best measure if it’s now worth £12. I know other people in other countries do it, so, you know, globalism and all that.”

That is exactly what the O.N.S. have just done. And I chose those figures for a reason, as that is also that exact amount by which the figures increase. 

“The headline inflation figure measured in September would grow from 1% under the CPI index to 1.2% under the CPIH and some economists have argued that in the long-term changing the gauge of inflation could have important implications. For example, the Bank of England sets its benchmark interest rates with a reference to a 2% inflation target as measured under CPI and the same goes for benefits, state pension and tax thresholds.” (International Business Times, 15th November 2016)

To change a statistic based on a point of view is a juxtaposition, a contradiction in terms. Statistics are only reliable if they are objective, not subjective. I think the general public have become sick to the top of their heads of being told how to think. And being told how to think is now rarely overt but through “facts” and “figures” that are being manipulated to present as “fact” creating a sort of “virtual reality” that simply doesn’t match our real life experience, values and wisdom. 

The temerity of blaming a looming inflationary crisis on Brexit, whilst changing the goal posts under the table, is controversial:

“Jill Leyland, a fellow of the Royal Statistical Society, is another economist worried that the ONS is shifting its focus to CPIH and not providing the general public with a measure that reflects their experience of inflation – something the retail prices index (RPI) was previously seen to do, although it has also faced criticism for overstating inflation and the way it includes housing costs.

“We are concerned about some ongoing issues with this measure, which were reflected in its de-designation as a national statistic,” said Leyland.

“CPIH, which as a derivative of CPI was primarily designed for macroeconomic purposes, does not give the public a price index which measures the actual impact of inflation on households to replace RPI.” (The Guardian, 15th November 2016)

In fact, I believe inflation will rise and rapidly in the near future but that it will be the inevitable economic quid pro quo in response to the years of quantitative easing. If one increases the number of notes in circulation, each note will buy less in relation to the same loaf of bread etc. 

Sixth, it is worth noting this U.K. economic news was given during the week when the world was looking the other way, at America.

So, factors to watch in relation to Gold and Silver prices moves are; U.S. interest rate rises, inflation and lastly, I would put China’s economic tremors back up on the list:

As Zerohedge reports today week, “Fool me once, shame on you; Fool me twice, I must be a Chinese commodity speculator. In a disastrous case of deja vu all over again, commodities from copper to iron ore and from rebar to coking coal have exploded higher in the past few weeks… just like they did in April/May of this year.”

And Tyler Cowen writes in Bloomberg View this month that he believes “China can resist a crash but can’t prevent one.”  A professor of economics and an author on American stagnation, he explores the thought-provoking differences between the Western economic model and the Chinese approach in this piece but comes to the conclusion that; “there is a race on, and much of the global economy depends on the outcome. It’s a question of ticking debt and bad investment decisions against the forces favoring Chinese economic catch-up. For all the talent of Chinese economic policy makers, it seems that the race keeps getting harder. I don’t expect the forces of catch-up to win every time.

I am optimistic about the longer-run prospects of the Chinese economy, given the extraordinary talent and ambition in that country. In the shorter run, I would not be surprised if China’s 1929 moment still awaits. I’m not sure if the passage of another year without major incident, as 2016 seems likely to be, should make me feel better about that.” While the world’s mainstream press were looking west to the pantomime of American politics, to the East, China continued to buy physical gold: “or the 16th month in a row, The People’s Bank of China (PBOC) gold reserves were updated. The latest update showed that the PBOC’s gold reserves grew by 130,000 ounces (approximately 4 tons) in October.” 

When it comes to trusting our own instincts and thinking for ourselves, I am reminded of a quote from someone I know which as stuck with me; his mother always used to tell him, “Never forget that the ark was built by a novice and the titanic was built by experts.”

Browse Bleyer’s selection of Gold and Silver bars and coins or pick up the phone to speak with one of the friendly, professional team on 01769 618618. From Special Offers to Gold bars to holding Gold in your pension pot, the team are there to help you through your purchase of your own physical Gold and Silver.