We hope you are continuing to have a lovely summer. The weather is perfect for a staycation in the beautiful UK and I for one feel truly blessed to live in the South West. We enjoy paddle boarding in this stunning weather if you haven’t tried it, its the UK’s fastest growing sport and truly great for those core muscles. Great for peaceful headspace too.
This week’s article is a very quick look at the monthly news, especially the key points to add onto our radars as we enter the lazier summer months.
Interest Rate Rise Imminent?
The main point that screams for attention on our financial roadmap this week, is the debate over whether interest rates will rise early August. The Bank of England will meet next week to decide whether to do so. As we’ve touched on before, higher rates tend to favour a fall in the price of Gold; at least in the beginning. So another chance to buy some physical precious metal may present itself.
The Guardian leads with the following: “The Bank of England is considering raising interest rates even though the UK economy is showing signs of weakening, and there are mounting signs of danger from a hard Brexit, according to a Guardian analysis of economic developments over the past month.”
This view is also upheld by Rathbones: “With recent data looking good, should the Bank of England raise interest rates in August? Edward Smith, head of asset allocation research at Rathbones, says YES. Central banks should demonstrate consistency. The more one changes its “reaction function” (as economists call it), the less it will be able to anchor inflation expectations. And given that the Old Lady of Threadneedle Street changes her mind more times than Argentina goes bankrupt, I want some dependability. The Bank’s latest narrative makes sense. Echoing the Office for Budget Responsibility, and in line with our own modeling, it now estimates that the UK’s productive capacity can expand at an annualised rate of just 1.5% a year. So if GDP growth (demand) comes in above that, it’s likely to be inflationary and will require a higher policy rate, even though growth of 1.5% – 2.0% still seems weak.
Big Upswings for Gold?
It seems many factors are creating the perfect storm for an upswing in the Gold price after the quieter summer months:
“Gold is quite cheap adjusted to ‘M-1’ money supply growth and real-world inflation. Admittedly, the idea of gold ever going up again, much less quickly, seems a little crazy today. However, when you look at the ultra-low valuations of gold today versus stock market prices, long-term paper money creation, and honest inflation rates, you start to see the potential for a big move in this “hard money” precious metal. While everyone is fascinated by the bitcoin mania of 2017-18, few are looking at the old relic of gold as a better investment alternative going into a future economic recession and/or stock market panic. The summer swoon in gold has been almost entirely a function of the rising dollar value. If gold holds the same value and purchasing power in foreign currencies, all else being equal, a rise in your local currency translates into a like percentage drop in gold, when priced in that currency,” (Seeking Alpha).
Hard or Soft Brexit?
Many commentators are concerned over the possibility of a ‘hard Brexit’. Many are optimistic that the UK will avoid a ‘soft Brexit’. The financial opinion is highly driven by the particular writer’s political opinion. Some see the clean break and uncertainty as a chance for a new start. Some see it as an economic disaster to be leaving and transpose that fear onto the floundering markets.
As the vote was 52% – 48%, no matter which way you voted, the key point here is for all of us to keep up-to-date with the last few months of negotiations and invest in Gold and Silver as we see best suits our financial plans and aims.
This month’s news also revealed the Vote Leave campaign had overspent by a whopping 10% (£700,000). We hope that an investigation is also carried out on the Vote Remain campaign, but wonder what effect this will have (if any) on the ongoing proceedings, (Channel 4 News).
As in any negotiations, most parties will not truly show their hand until very close to the wire. So I would personally expect a great deal of news and developments to swarm out of the corridors of the EU news office in the weeks just before the March 2019 deadline.
There is still certainly a sense that the stakes are being raised as the prospect of a ‘no deal’ Brexit is raised as a possible outcome by both sides of the negotiating table. A ‘no deal’ Brexit is widely seen as being the worst possible outcome for the British Pound by foreign exchange analysts who point to the substantial uncertainties and trade disadvantages this poses to the UK, in the short-term at least. The EU has warned member states to increase their readiness for a ‘no deal’ outcome, while new UK Brexit secretary Raab has said the UK could refuse to pay its Brexit bill if no deal is secured. On such an outcome Sterling is expected to go notably lower; for now though most analysts do not hold this to be a likely outcome.
“The UK and EU appear to be fast descending into a game of chicken over Brexit. PM May has little room to shift more towards the EU’s position, but the European Commission remains adamant about not permitting the UK to ‘cherry-pick’. This game of chicken should raise market nervousness about the Pound,” says Alvin Tan at Société Générale. This tells us that while markets are not yet panicking, there is certainly a move by the more cautious element of the field to start buying protection against a ‘no deal’ Brexit,” (Pound Sterling Live).
I suspect we’re all hearing our Gold bug brains saying the historical mantra that “uncertainty favours Gold.” Add the increasing possibility of a rate rise, together with the summer doldrums of lower Gold prices, and this summer is putting itself forward to be an excellent buying opportunity for some precious metals investment.
The team are in the office over the summer and look forward to taking your call 01769618618, as you’ve hopefully taken advantage of a break in work, combined with the slightly lower prices, to enter into the world of owning and holding your own physical Gold and Silver.
If you’re not sure and have questions, call the team. Bleyer value the discursive process, together with enjoying sharing the general concepts of Gold and Silver education, so take your time, talk to one of the team and proceed at your own pace. We fully appreciate this is a big decision. How we invest our hard-earned cash and savings deserves attention, careful thought, and wisdom.