Gold Hammered [Global Nuggets Newsletter]
Gold Hammered
Global Nuggets
21/07/2022
When I started in the precious metals business back in 2014, I was informed that the ideal market for gold was a volatile one. Rising and falling markets created opportunity, I was told; flat markets did not. Well, this week has certainly been a volatile one, with gold dropping US$40 on Thursday alone. Analysts talk about US$1700 per ounce for gold as being a new ceiling. How long will this last?
Market Volatility
As I have written in previous posts, we are seeing wild swings in all markets as governments and economies try to get inflation under control. Equities and bonds have had a horrendous 6 months, with tech stocks falling the most. Crypto has also had a cleanout. Only 3 months ago, a 1% rise in US interest rates by the Fed would have seemed fantastical; now, it seems that a 100-basis point hike (1%) is already factored in for July. The US dollar is at record highs as it's seen as a safe haven currency – reaching parity with the Euro this week for the first time in 20 years. It seems as if Armageddon is around the corner.
Rupert Watson
I also had the pleasure of meeting with a leading financial analyst this week, Rupert Watson. With a long career in finance with Goldman Sachs and Investec, I wondered what his views might be for the world (economically) over the next year. My surprise is that he was fairly upbeat, and this seems to be reflected elsewhere, with some analysts believing we may bottom out of the current turmoil sooner than later. Watson believes that we may see inflation peaking over the next few months and then coming back down quite hard in 2023. Interesting. He even went as far as saying that recession would not loom its head as so many have predicted.
What Does This Mean for Gold?
Some analysts will argue that once inflation peaks, gold will strengthen; others see the price drop back to pre-pandemic levels. Whatever happens, expect to see further volatility. Volatility presents opportunities. Major geopolitical challenges remain, covid is re-emerging around the world, and the cost-of-living crisis is affecting the western world badly. Whilst the northern hemisphere swelters in the 40-degree summer heat, winter is around the corner and, for many, serious financial hardship. Precious metals still seem like a very smart investment.
UK Royal Mint
This week I also visited the oldest business in the world, the UK Royal Mint. This business can be traced back to 886 AD when it minted coins at the Tower of London – what a great opening line when meeting new clients! I’ll be sharing some of my experiences in next week’s newsletter – the debate about the future of cash and how the Royal Mint has coped with a 10-times increase in gold and silver demand.
This Week's News
Here Are Some Nuggets From This Week’s Precious Metals News:
The World Gold Council's John Reade looks at the three underlying reasons gold has shed almost -6% in July alone
Gold hammered, analysts warn of capitulation event if price drops below pre-pandemic levels
Celsius Network: crypto firm reveals $1.2bn deficit in bankruptcy filing
Rates spark: Italian jitters ill-timed for the ECB
https://www.fxstreet.com/analysis/rates-spark-italian-jitters-ill-timed-for-the-ecb-202207150943