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This Week in Gold – 14/01/2022

Price Movements

Gold opened the week at $1,795 before slipping a few dollars during the early hours of Monday’s trading. By early Monday morning gold had already printed its weekly low of $1,791. From this low, gold rallied over 2% and reached a weekly high of $1,828 by Wednesday evening. A sell-off on Thursday afternoon saw gold dip to $1,815. We saw $1,815 act as support during trading on Wednesday and the same was seen on Thursday, as the dip was bought fairly quickly. Gold is looking likely to close the week’s trading well in the green and close above $1,820.

Silver investors were glad to see some positive price action throughout the week. After threatening to break below $22 last week, investors were relieved to see silver’s price gain 3.3% this week. After starting the week at $22.25, silver is currently trading above $23. 

 

Inflation and a Hawkish Tone

Wednesday’s CPI figures were the figures to watch this week. The latest inflation data shows the Consumer Price Index has increased 0.5% in December as prices and inflation continue to rise at rates unseen in decades. The U.S. rate of inflation recently hit its fastest pace in nearly four decades as the pandemic-related supply and demand imbalances, along with stimulus intended to shore up the economy continue to cause concerns.

The US Labor Department said on Wednesday that the consumer-price index, which measures what consumers pay for goods and services, rose 7% in December from the same month a year earlier, up from 6.8% in November. That was the fastest since 1982 and marked the third straight month in which inflation exceeded 6%.

Trader’s will also be keeping their eye on the retail sales figures which are to be released by the Census Bureau on Friday afternoon. Traders will use these figures to gauge how strong the US consumer is, which is one of the indicators of a healthy and thriving economy. Better than expected figures typically would be good for the dollar and add some pressure to the price of gold. 

Also, weighing heavy on the price of gold is the Fed’s recent hawkish tone. Powell once again assured Americans this week that the Federal Reserve will combat the issue of high inflation. Powell told the Senate Banking Committee on Tuesday that “if we have to raise interest rates more over time, we will,” and that “[the Fed] will use our tools to get inflation back on track.” This recent hawkish stance from the FED and the likelihood of interest rate hikes sooner rather than later resulted in yields rising and will likely support the US dollar heading into 2022. Gold typically struggles to attract investors as interest rates rise. Expectations around a Fed interest rate hike lifted U.S. Treasury yields higher which in turn has the potential to increase the opportunity cost of holding non-yielding gold.

However, gold investors will take relief from last week’s unemployment figures. The number of Americans filing new claims for unemployment benefits increased to an eight-week high in the first week of January. So clearly the US economy is far from being in full health.  Also, the fear that the Fed has done irreversible damage by over-stimulating the economy with low rates and continual bond purchases still exists as inflation continues to run far above officials’ 2% target despite Powells constant reassurances. This in turn still sees many investors seeking gold as a safe haven asset and a hedge against further inflation. 

 

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The Central Bank of Ireland Buys Gold

Why Central Banks hold Gold

Gold has played an integral role in the financial reserves of nations for centuries. Central banks across the globe are significant holders of gold and the yellow metal’s appeal is showing no sign of weakening. One of gold’s primary functions for central banks is to diversify their reserves. The banks are responsible for their nations’ currencies, but these fiat currencies can be subject to fluctuations in value depending on the perceived strength of its underlying economy. During times of hardship or uncertainty, banks may be forced to increase money supply. This rapid increase in money supply may be necessary to stave off economic turmoil but can come at the cost of devaluing the currency. For example, we seen the Turkish Lira lose nearly 30 percent of its value against the United States dollar in November and the Turkish Central Bank was forced to intervene in an attempt to bolster their collapsing fiat currency. Gold, by contrast, is a finite physical commodity. As such, it is a natural hedge against inflation and store of value. 

Ireland adds to its Gold Reserves

According to the latest estimate from Eurostat, inflation in Ireland rose to 5.4% in November and inflation in the Eurozone has soared to the highest level since the euro was first introduced. Inflation is now running at more than twice the European Central Bank’s 2% target. In response to these risks and others, the Central Bank of Ireland has recently added to its gold holdings. The Irish Central bank has purchased 2 tonnes of gold in recent months. This has ended the bank’s more than decade-long period of unchanged holdings of gold. We can presume that this decision was made partly in response to the new risks arising from the coronavirus pandemic, global spikes in government debts and growing concerns over inflation. 

Ireland Isn’t the Only Net Buyer of Gold

Ireland is not the only nation to be stockpiling gold in recent times. Brazil was another notable buyer during the first half of 2021, adding 53.7t to gold reserves between May and June, their first sizeable increase since November 2012. Singapore has also increased its gold reserves by 20%, buying  for the first time in decades. Thailand was one of the largest net buyers of Gold earlier this year, adding 90.2 tonnes of gold to their reserves. The United States and Germany remain the largest holders globally with 8,133.46 and 3,359.12 tonnes held respectively. 

Overall, interest in gold is growing not only from central banks and corporate institutions but also from retail investors. Merrion Gold is an Irish-owned and operated business that offers investors a way to invest in physical precious metals.  If you are interested in investing in physical gold, silver, platinum or palladium please give us a call on 012547901 or email info@merriongold.ie.

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This week in Gold – 05/11/2021

Price Movements

Gold started the week trading at $1,782 per ounce. The week got off to a good start as gold edged higher throughout Monday and Tuesday. By Tuesday afternoon, the price had gained $13 per ounce. However, the remainder of the week was somewhat of a roller-coaster for gold investors as the price hit a weekly low of $1,760 by Wednesday afternoon before rallying nearly $40 to $1,798 by midday on Thursday. Despite gold’s strong upward momentum during trading on Thursday it failed to get over the $1,800 mark. On Friday, gold finally broke through strong resistance at $1,800. Gold is now looking likely to finish the week at a two-month high of $1,815.

Bank of England, The Federal Reserve and Non-farm payrolls

As the Federal Reserve concluded its two-day policy meeting on Wednesday, they announced their plans to begin to unwind its stimulus programme this month. The latest tapering plan was announced as the U.S. economy continues to contend with surging inflation. Wednesday’s announcement that it will slow bond purchases is a step toward more normal monetary policy. The Fed said it would start reducing its monthly bond purchases this month with plans to end them in 2022. It didn’t come as much of a shock to hear the Fed also reiterate their beliefs that the currently high levels of inflation are merely “transitory”. Gold gained and the dollar weakened as the U.S. Federal Reserve approved maintaining low interest rates for some time. “We think we can be patient”, Jerome Powell, the Fed’s chair, said about the path ahead for interest rates. 

The market then shifted its attention to the Bank of England’s policy meeting on Thursday. Eyebrows were raised when The Bank of England decided to leave interest rates unchanged. This news came as somewhat of a shock to the market due to the Bank of England’s hawkish tones in the recent months. The Bank’s Governor Andrew Bailey did say “it was a very close call” but decided to vote in favour of keeping UK interest rates at a record low of 0.1%. 

On Friday we learned that U.S. job growth increased more than expected in October as non-farm payrolls increased by 531,000. The unemployment rate also fell to 4.6% as it appears more Americans are more comfortable returning to the workforce as employers offer higher wages and the concerns over Covid-19 appear to be subsiding.

Overall, gold’s price got a boost as policymakers in the United States were patient about raising interest rates and the Bank of England were surprisingly more dovish than expected. Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.

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This Week in Gold – 22/10/2021

Key price levels for Gold and Bitcoin Reached

Gold started the week at $1,766. The yellow metal slipped to its low of the week of $1,760 on Monday morning. From Monday afternoon onwards the momentum was bullish and the price of gold trended higher for the remainder of the week. Gold failed to trade above $1,800 last week but succeeded this week. Gold rallied on Friday afternoon as rising inflation pressures helped push gold prices to a six-week high of $1,812. Friday’s rally was cut short after Federal Reserve Chair Jerome Powell’s hawkish comments seen gold sell off from its high. Powell assured the markets that the U.S. economy is on track to taper its monthly bond purchases and that the labour market is on course to reach maximum employment in 2022. Investors are hoping that this key phycological level of $1,800 can hold. Some selling pressure would be expected at this key level however gold is still looking likely to finish the week in the green, up 1.6% on the week.

On the same week we seen gold trade back above this important level, we also seen Bitcoin trade above $67,000 on Wednesday. $67,000 marks a new all-time high for BTC.  As expected, we have seen some resistance at this level and bitcoin has slipped back to just over $61,000.

In recent cryptocurrency news, we heard that PayPal has launched its cryptocurrency service in the UK. PayPal has enabled its UK customers to buy, hold and sell digital currencies since last month. Earlier this month U.S. Bank announced its new cryptocurrency custody services for institutional investment managers.  Crypto enthusiasts also celebrated the launch of a new Bitcoin ETF which began trading on the New York Stock Exchange earlier this week. All of this news and progress is making it even easier for investors, both retail and institutional, to get involved in the cryptocurrency space and has boosted the sentiment and value of the cryptocurrency market as a result.

As a comparison, the current market capitalisation of bitcoin is 1.153 trillion USD whereas gold’s market cap is currently approximately 11.4 trillion. So, bitcoin in general still has a long way to go before it threatens gold as a major multi-trillion-dollar asset class.

Overall, whether you think bitcoin is “fools gold” or “digital gold”, there is no doubt that the price has certainly gained momentum recently. Merrion Gold’s partnership with Coinify makes it possible for Cryptocurrency investors to have the best of both worlds as it is now possible to purchase gold, silver, platinum and palladium using cryptocurrency. All major cryptocurrencies will be accepted as payment, which will allow customers to convert their crypto holdings directly into bullion.

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This week in Gold – 15/10/2021

Price Movements

Gold opened the week at $1,756, and following an uneventful first half of the week the price had risen $4 per ounce by Wednesday afternoon. That was the case until an explosive move on Wednesday afternoon, which saw the price jump over $35. Upward momentum continued into Thursday as gold printed a high of $1,799. However, selling pressure around the $1,800 mark saw the yellow metal retreat, which saw gold fail to reach the key psychological level of $1,800. Friday saw a steep decline in the gold price as it fell by more than 1%. Silver also enjoyed a positive week, with the price hovering above $23.34 on Friday afternoon, after starting the week below $22.60.

Overall, a positive week for gold as the price is looking likely to close 1.5% higher on the week. After such a positive week in the gold and silver markets, it is important to assess the most popular reasons investors are currently citing for investing in gold.

 

Why are investors choosing Gold?

Portfolio Diversification – 

Diversification is one of the key principles of investing. If an investor chooses to ignore diversifying their portfolio, they could risk losing everything if that one particular investment collapsed. The majority of investment portfolios are usually made up of financial assets like stocks, bonds and real estate. By diversifying their portfolios, investors are achieving additional protection from fluctuations in the value of any single asset or group of assets. The risk factors that may affect the price of gold are very different from factors that affect other assets and asset groups. During times of fear or geopolitical turmoil, the price of gold tends to rise, providing a hedge for other assets such as real estate as equities.

Currency Hedge – 

Gold holds value against all currencies directly, making it an important trade for protecting against rising inflation rates, currency debasement or indeed a currency crisis. Gold, in turn, offers a way for investors to protect their wealth and purchasing power.

As a rule, when the value of the dollar decreases relative to other currencies worldwide, the price of gold tends to increase in U.S. dollar terms. In theory, a weaker US dollar makes gold more affordable, which increases the demand for gold which in turn drives up its price. With the opposite also being true, we can say that gold tends to have a negative correlation to the dollar.

Inflation Hedge – 

Inflation is a measure of the rate of rising prices of goods and services in any given economy. Inflation makes money saved today less valuable tomorrow which is a concern for consumers as it diminishes their purchasing power over time.

Gold especially is considered a hedge against inflation, whereas inflation is one of the key risks for economy-based investments e.g., stocks. Gold is viewed as a safe-haven asset, when other markets crash, gold typically sees its value increase. Inflation and a declining dollar typically results in rising gold prices.

By purchasing gold, investors can shelter themselves from inflation and times of global economic uncertainty. This factor in particular is especially relevant at the moment as Eurozone inflation hit its highest level in 13 years in September. 

 

Given the above reasons, if you are interested in investing in precious metals, please call us (01) 254 7901 or email us on info@merriongold.ie. Merrion Gold offers investors the opportunity of investing in precious metals at highly competitive prices. Clients of Merrion Gold have the option of investing in Gold, Silver, Platinum and Palladium, and can store their investment on site at Merrion Vaults from as little as €220 per year. Whether you are an experienced investor or interested in making your first investment in precious metals Merrion Gold would be glad to help. 

 

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08/10/2021 – This Week in Gold

Price Movements

Gold started this week trading at $1,762 per ounce. The price was well supported around the $1,750 level and the yellow metal bounced of this support on multiple occasions throughout the trading week. The support of $1,750 was broken on Wednesday morning as the price fell to $1,746. Trading below $1,750 was short-lived. Gold traded at a high of $1,778 on Friday afternoon shortly after the disappointing non-farm payroll data at 13:30. It wasn’t long before the high sold-off and it is currently looking like gold will end the week where it started at around $1,762.

 

Tapering in sight?

As we already know, the Federal Reserve’s massive monetary stimulus has been ongoing since the outbreak of the COVID-19 pandemic.  The FED’s asset-purchasing programs or quantitative easing were put in place to ensure smooth functioning of the financial markets during the current economic uncertainty.  As this monetary support continues the Federal Reserve is beginning to face growing criticism over its ever-increasing balance sheet and growing debt.

The US debt is currently in excess of $28 trillion. Following weeks of debating, US Senate avoids crisis by voting in favor of increasing the debt ceiling once again. The Senators agreed this week to increase the limit of debt that the U.S government can have outstanding by another $480bn. The scale of the asset purchasing program has been open-ended to ensure sufficient liquidity and capital in the financial markets. However, the Federal Reserve has recently hinted that it will start easing US stimulus this year. The FED were looking for further progress to be made relating to employment before beginning to reduce or taper its monetary support.

Hence why all eyes were on Friday’s non-farm payroll data as the market eagerly awaited confirmation of a strengthening US economy. The results showed that the U.S. added 194,000 jobs during September. Despite these figures being below Morgan Stanley’s estimate of 700,000 new jobs, the number is still positive and is a somewhat encouraging figure nonetheless. The unemployment rate also fell to 4.8%. After the payroll figures were released, Biden said in his press conference that the recent unemployment rate shows that “the U.S. is moving forward”. Word on the street is that Friday’s jobs report has set the stage for the U.S. to begin withdrawing stimulus and commence tapering its balance sheet as early as November as the economy continues to show signs of rebounding. Traders continue to speculate as to whether or not these rumors of tapering are already priced into the market. The last thing any gold investor would like is another taper tantrum similar to the one in 2013 which seen gold crash and the US index soar.

On the other hand, this week was particularly volatile and dramatic for the energy sector in particular. For example, prices of Natural Gas and Crude oil continue to surge having a knock-on effect for the consumer. Many analysts are adamant that inflation is far from “transitory”, contrary to the Federal Reserve’s constant reassurances. Rising inflation still has investors seeking gold as a hedge against this current face-moving rate of inflation.

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24/09/2021 – This week in Gold

Price Movements

Gold began the week trading at $1,754. Gold’s weekly high of $1,785 was hit on Wednesday evening. The price slid from this high during Thursday’s trading session all the way to a weekly low of $1,738. Thursday’s low was the lowest price seen since August 11th. There was a bounce from this low on Friday but the yellow metal failed to hold above the psychological level of $1,750 for long. Gold is currently trading around $1,744 at the time of writing, down about $10 per ounce on the week. 

Silver briefly traded above $23 on Wednesday, which turned out to be silver’s weekly high. Silver was looking likely to close the week in the green until a sell-off on Friday afternoon saw the price fall nearly 2% and is currently trading $0.20 lower per ounce on the week, down 0.75%. 

Market concerns over Evergrande

The undesirable developments in the Evergrande saga have been felt across the global financial markets this week. China’s Evergrande has been making the headlines for all the wrong reasons, as concerns grow over its financial position and its chances of defaulting. As the future for the Evergrande group, a Chinese real estate company, and its bondholders remains uncertain, we see some investors seeking safe haven assets, such as gold. 

The effect that the Evergrande emergency in China has on the markets extends beyond the stock market, commodities will be impacted as well. The Asian Stock markets were on edge during the week, anxious about the debt-ridden company’s fate.  Jerome Powell did attempt to reassure the market that Evergrande’s distress does not appear to pose a risk to major U.S. or Chinese banks. Despite this reassurance, as the story unfolded, we saw the sentiment shift to risk-off. US and Chinese equities began to sell-off as some sought a flight to safety, buying gold to protect against any further developments in regards to Evergrande and the impact that would have on China’s economy. Gold prices bounced off a 6-week low on Friday, buoyed by safe-haven demand. However, the safety trade rally on growing Evergrande fears was offset by the Fed signaling tapering and an earlier-than-expected rate hike which put pressure on bullion prices. 

The anticipated interest rate hike would also increase the opportunity cost of holding non-interest-bearing assets, like gold. While gold is considered as a hedge against inflation amid widespread stimulus, a hawkish approach by the Fed could weaken gold’s appeal. Reduced central bank stimulus and interest rate hikes tend to lift bond yields and in turn push gold lower.

Overall, the US Federal Reserve’s signal on an earlier-than-expected rate hike kept gold prices on track for a weekly decline. Gold investors hope for a break next week and to regain some bullish momentum.

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17/09/2021 – This Week in Gold

Price Movements

This week’s trading opened at $1,788. The price consolidated around this level as Monday’s trading was relatively flat. We witnessed a break-out back above $1,800 on Tuesday, with this week’s high of $1,807 coming on Tuesday afternoon. Bids above $1,800 were short-lived and the price trended lower during Wednesday’s trading session. A large sell-off on Thursday afternoon saw gold plummet over $30 to a weekly low of $1,751. This was gold’s sharpest decline in almost six weeks as a result of a rallying US dollar. Gold did manage to rebound from Thursday’s low to $1,765 on Friday morning before further selling pressure had the yellow metal back trading around its weekly low. Gold is looking likely to end the week over 2% lower.

Silver continued to underperform gold, down over 5% this week.  Silver was trading at $23.80 at the beginning of the week. After large volumes of selling pressure on Thursday and Friday, silver is currently trading at its weekly low of $22.50.

 

Surge in Retail Sales & Inflation data

CPI data from the U.K. was released on Wednesday. The consumer prices index in the UK surged by 3.2% in the 12 months to August. This was the largest ever month-on-month increase since 1997. UK retail sales declined 0.9% in August as UK consumers have been reluctant to spend which may be a worrying sign for the BOE and the UK economy.

Elsewhere in the world, the Australian unemployment rate fell to 4.5%, which was better than expected. This could suggest a strengthening labor market in Australia. 

The most impactful economic news this week was the surprisingly better than expected US retail sales data. There was a rise in U.S. retail sales in August which is a positive sign for the US consumer and economy. The results of which boosted the price of the dollar, sending the price of gold sharply lower.

Overall, a poor week for the price of gold and silver. Perhaps the price may recover next week as some investors may consider buying the dip as gold hovers around its support at $1,750. Interestingly, the price of platinum held up quite well this week, down 1% compared to gold and silver being down 2% and 5% respectively on the week. This shows the importance of a well-diversified portfolio. Platinum bars and coins are also available to purchase through Merrion Gold. 

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10/09/2021 – This week in Gold

10/09/2021 – This week in Gold

Price Movements

After a promising week for the price of gold a week ago and a sell-off in the US dollar, we seen the precious metal trade at levels not seen since July. However, the reverse was true this week as we seen a rebound in the price of the dollar and gold slip back below $1,800 once again. Gold began began the week trading just below $1,830. $1,830 has acted as a strong resistance level which gold has tested on several occasions over the past few months but has yet again failed to break through it this week. Gold trended lower over the course of the week, printing a low of $1,785 on Wednesday afternoon. We seen a bounce back early Friday morning to $1,803 but this was short lived and gold is looking likely to close the week below $1,800, currently trading at $1,791 at the time of writing.

Silver also gave back the previous week’s gains and is currently down $0.93 per ounce over the course of the week. Silver started the week at $24.77 and is currently trading at its weekly low of $23.84 at the time of writing.

Overall, a poor week for gold and silver investors as gold and silver are down 2% and 3.75% respectively this week.

 

The ECB Press Conference

On Thursday afternoon, we seen the European Central Bank President Christine Lagarde take center stage at the ECB’s press conference. The decision has been made to reduce the pace of asset buying under the pandemic emergency program. However, Lagarde stressed that this approach didn’t amount to “tapering” but instead was a mere “recalibration” of stimulus efforts. The ECB president stated during her speech that “the lady isn’t tapering” and that latest announcement of scaling back asset purchases is far from being a full taper. Lagarde also stressed that a full economic recovery could yet be further delayed by the increasing spread and concerns of the delta variant. It was also recognized that inflation pressures are building in the short term but yet again we were assured that these are likely temporary and transitory.

In other news, outside of the Eurozone, Canada posted strong jobs growth for the month of August on Friday afternoon. The Canadian economy added 90,200 jobs during the month of August and the unemployment rate fell to 7.1%, below the estimate of 7.3%.

Overall, signs of hope of making a full economic recovery, the easing of asset purchases, the further reassurance that inflation is merely “transitory” and encouraging employment data was negative for the gold market this week. Gold bugs will be hoping for a bounce back above $1,800 next week.

 

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Rising Inflation & Precious Metals

Purchasing power of the US Dollar

Since the creation of the Federal Reserve System in the United States we have seen a sharp and constant fall in the purchasing power of the US dollar over time, a trend that has been accelerated since the abandonment of the gold standard in August 1971. This devaluation of the dollar has been caused by rising inflation and increasing money supply. In fact, $1 in 1913 had the same purchasing power as $27 today. This leads many investors seeking a better store of value than the US dollar. Gold and silver have been identified by many as a means of protecting an investor’s purchasing power in the long run. Gold in particular can help investors protect against potentially excessive asset price inflation and currency debasement.

 

Inflation in the COVID Era

The White House more than doubled its forecast for annual inflation in projections released in late August, as supply-chain disruptions stemming from the Covid-19 pandemic continue to put upward pressure on prices. While the Federal Reserve has maintained that it is not worried about inflation, the US Commerce Department said that prices in July were up more than 4% from a year ago. For now, the Fed says they will continue to inject large sums of money into the economy with the aim of expediting economic recovery and improving employment levels.

This is not only an issue for the United States. In the Eurozone, the average prices of goods and services in July were 2.2% higher than average prices a year ago. The last time that a similar average price increase was recorded by the Consumer Price Index (CPI) was March 2012. The latest figures from Friday 27 August show that consumer prices in the eurozone rose by 3% in August. This far exceeds the ECB’s 2% price inflation target. 

With short-term deposit rates near zero, the real value of deposits will continue to be eroded by any further higher price inflation.

 

How are some investors responding to inflation running hot?

This is causing many inflation-wary investors to purchase gold as a hedge against inflation. For example, data from the World Gold Council shows that demand for physical bullion in Germany is at its highest level since 2009.

More remarkably, Palantir, the American software company, bought $50 million worth of gold bars in August. Palantir decided to invest in gold in response to the economic uncertainty resulting from the coronavirus pandemic and the response of governments response to it.

If you too are interested in purchasing gold, please call us on +353 (0)1 254 7901 or email us at info@merriongold.ie and we will be glad to assist you with investing in gold and other precious metals.

Sources:
https://www.npr.org/2021/08/28/1031976727/how-the-u-s-is-handling-the-rise-in-inflation

https://www.rte.ie/brainstorm/2021/0825/1242740-inflation-ireland-cpi-hicp-european-central-bank/

https://www.bloomberg.com/news/articles/2021-08-31/euro-area-inflation-jumps-to-decade-high-3-in-test-for-lagarde

https://www.bloomberg.com/news/articles/2021-08-26/inflation-wary-germans-still-love-gold-despite-fed-taper-threat

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