We hope you, your family and loved ones have enjoyed the Passover, Easter or long holiday Bank Holiday weekend, whichever you celebrate the most. It seems we still wait for the Spring here in Britain, but there have been a few days of tentative sun, so hope is on the horizon for all the blossom and beauty that Spring brings.
We're taking another quick look at the Gold news, as to do otherwise would be to ignore the exciting shifts that occurred in the Gold price recently.
This Week’s Gold Update
This week the Gold price rose from around £940 an ounce to £957. This is a considerable rise in proportion to recent moves.
The reason for this sudden rise is the sudden return of a long-standing tension between China and the US. Bleyer have highlighted both this ideological and financial tension on a regular basis over the last seven years. It never seems to disappear too far below the surface on the headlines. In fact, I would go so far as to say it is a background hum, an integral fault line, within the East meets West economic fiat currency system, upon which we operate as a globe.
Just like faults in the earth’s crust, we can live as if they don’t exist, in a state of semi-denial. I’m not convinced, however, that financial commentators live in denial, particularly those who work within the physical Gold and Silver markets. But the tabloid headline writers and the short term crowd mentality of the young marketers certainly can.
As the Wall Street Journal states this week: “Gold prices rose Monday after China imposed tariffs on a range of U.S. goods, following through on a promise to retaliate against the Trump administration’s penalties on imports of Chinese steel and aluminium.
Front-month gold for April delivery added 1.5% to $1,342.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have stayed between about $1,305 and $1,360 this year, moving within that range based on safe-haven demand from investors, swings in the dollar and worries about higher interest rates.” (3rd April 2018)
Of course, this was inevitable.
What hasn’t been anywhere near as easy to predict is the timing. This East meets West dance has incurred an unusual rhythm of stops, starts and bluffs over the last seven years I have been writing for Bleyer. I guess it therefore always makes sense to be prepared.
Kitco, an extremely reliable hub of financial data-based commentary, deepens the view of the potential impact of this trade war with the following sentiment: “The threat of a trade war and new tariffs on steel and aluminium were concerns among some participants in the ISM survey. "New tariffs are causing concern across the supply chain. The full impact will take a few weeks to reveal itself," said one respondent. (2nd April 2018)
This development is weighty, clearly now ongoing and therefore deserves our regular attention. The reason is there are too many consolidating factors which can come into play to exponentially increase the impact of the East-West economic fracture. Some of these tension-compounding issues have been previously discussed here at Bleyer namely:
China vs US position on Iran
If China and the US are already on opposing sides in the richest oil playground in the world, this will only exacerbate the tension within the trade tariff frontiers: “With President Trump at the helm of the US, the relationship of the US with the rest of the world is changing, especially with China, Russia and West Asia. Analysts are watching how China responds as the US evaluates its position with respect to Iran, North Korea and West Asia. Recent trends indicate that China will move to fill any leadership gaps left by the US in global politics. (It is worth remembering that this is – to be historically accurate – a resultant of the last US Presidents hands off approach to US foreign intervention.) China has not been hesitant in opposing US decisions and is expected to continue to do so. In early 2018, China is expected to oppose the move by the US to decertify the nuclear deal that President Barack Obama struck with Iran in 2015. China is likely to have the support of the EU and Russia, thus dividing global opinion on this issue.
North Korea is linked to China, China to Russia and Russia to Iran. And they’re all connected via oil and gold.I first wrote about the connection between Russia, Gold and Oil back in December 2014. It was obviously a long way off.
So, some surmise that the Cold War never really ended, it just went into hibernation.
Why is this significant to Gold?
An international Gold backed currency is the most logical safe haven when fiat currencies collapse. Russia and China seem to be positioning themselves as the owners of most of the world's physical Gold, in order to be the creators of that new Gold backed currency.
“How heavily involved China is in managing the gold market is impossible for an outsider to know. But there is plenty of evidence to suggest that China is covertly buying gold while dumping U.S. Treasuries.” (Tyler Durden) This is a quote from as far back as October 2015.
Tech Stocks Fall Significantly
The other reason that the Gold price rose this last week was the sudden drop (and subsequent rebound) of tech stocks. Often seen as the ‘golden child’ of the stock market, tech stocks have enjoyed a false sense of security for a number of years. Not so this week:
“Wall Street shares plunged on Monday as investors fled technology stocks amid resurgent trade war worries, with key indexes trading below their 200-day moving averages and the S&P 500 closing below that pivotal technical level for the first time since Britain’s vote to leave the European Union in June 2016.” (Reuters, 2nd April 2018)
And these aren’t the nerdy unknown companies of the tech industry either, these are household giants within the I.T. market sector:
“As some of the most popular tech stocks have rolled over badly in recent weeks, investors are running for the exits. Morgan Stanley notes that over the past week alone, U.S. equity outflows have totaled $7.5 billion, resulting in 54 percent of all year-to-date money that went into stocks now being pulled out. Can’t say I blame them, with harrowing declines underway in widely owned big-cap technology names like Facebook (FB) and Amazon (AMZN).” (WDEF, 4th April 2018)
That figure illustrates exactly why a weekly update is key in gleaning where the price of Gold and Silver may be heading next. Let’s just take that in! 54% of all year-to-date money that went into stocks is now being pulled out! But isn’t that a typo? Do I really mean 54% of all money in stocks or 54% of all money in tech stocks? Surely the later? Well, actually…no. And here’s why:
“Tech (technology) stocks have witnessed their steepest decline in more than two years in the last couple of weeks. These stocks have grown so rapidly over the years that their declines have not just brought down the broader US markets but also the global markets. The top five tech stocks—Apple, Microsoft (MSFT), Alphabet (GOOG) (GOOGL), Facebook (FB), and Amazon (AMZN) - make up 14.4% of the S&P 500 Index. In other words, 1% of the stocks in the index account for more than 14% of the index.” (Market Realist, 3rd April 2018)
And is this a short-term jitter or is it led by a more philosophical awakening? It is the latter and logically so:
“Facebook’s misuse of personal data has investors worried about possible regulatory actions, which could affect other tech stocks as well. That has clouded the outlook of the sector, which until recently was the darling of the market.” This is significant financial news. Such a reality check of the vulnerability in the stock markets, therefore, wakes up investors from their crowd stupor and seeks to drive some money back into Gold.
Gold and Silver Price Rises in Times of Uncertainty
And our regular readers will know why. Gold is a historical safe haven, as very real concerns of economic warfare increase, together with severe jitters in the stock market increase the fear factor in opposing investments.
If you don’t yet own some physical Gold and Silver, either in the form of a couple of bars or in a beautiful selection of coins, consider starting now. In addition, storing some of one’s wealth in physical coins and bars is always a portable and internationally recognised form of wealth preservation in times of difficulty.
Call Bleyer on 01769 618618 to talk through your Gold and Silver purchases now. We encourage our readers not to be caught out by rising prices. Personal and thorough Gold Education is key. Call a member of the Bleyer team now to chat through your current investment choices. Or simply order online at bleyerbullion.co.uk at a time of your convenience, day or night.