GOLD RUSH 2019

2019 began in a relatively uneventful way for gold. In fact, for the first four months the price bobbed up and down, hovering largely around the £1000-an-ounce level. That said, this still represented growth of around 6% on one year earlier.

Then, in May, things got going.

By the end of May gold was up 5.5% in just four weeks! June saw it put on a further 7.7%, and July added yet a further 3.6%. If we measure this from the first Friday of May to the last Friday of July, the growth is 17.7%.
And August? At the time of going to press, the month wasn’t finished but prices were up 6.6% on July making gold’s growth since the beginning of May a staggering,… wait for it,… 25.4%.

All this at a time when stocks and shares are languishing.

SO, WHY GOLD?

Gold is just about the definition of a ‘safe haven’ asset. It yields long term returns, can be readily converted to cash, tends to perform well in times when other asset types are under stress, and is one of the few investments that can be physically owned, held and even transported by the owner.

With the considerable uncertainty in Europe at the moment – and not just related to the imminent exit of Britain, but also tied to the softening of the German economy and the questionable situation of others such as Italy – gold is an ideal safe haven.

There is also the ongoing tit-for-tat trade war between the US and China that everyone’s watching. At the moment it has all been about point-scoring and Twitter announcements, but fairly soon those tariffs and restrictions are going to start to ‘bite’ and at that stage we could have slow downs in the world’s two largest economies – between them worth a quarter of the world’s output.

IS THIS ALL THE RESULT OF SMALL INVESTORS?

It’s easy to understand why investors would be looking to buy into gold in this environment. But a significant amount of demand is coming from a type of investor that may surprise – and possibly disturb – you.

The Gold Council’s figures for gold purchases in the second quarter of 2019 reveal that 20% – one-fifth –
of total demand came from Central Banks. In fact, their purchases were up 47% on the same period last year.

The Gold Council’s report sums up the situation quite nicely, when discussing the purchases by Central banks so far in 2019:
“Buying momentum has continued strongly from last year – 2018 saw the highest level of annual purchases [by Central Banks] in 50 years – and is a clear indication of the central banking community’s mindset towards gold”

So, Central Banks are buying gold – more gold than they have for half a century! Should we be worried? Well,… possibly, yes.

Central Banks were actually sellers of gold until 2010 – not buyers. That is, they were, as a group, selling off gold, which would have added to the supply side of the things, and kept prices lower than they would have been without those sales.

Now, they’ve changed their mind, and are buying – and their purchases are increasing. In fact, in the first 6 months of 2019 they bought 374 tonnes – the most in any year since 2010. What should concern all of us, is that these are the same Central Banks that issue currency, and ordinarily they like investing in each other’s currency.

However, it seems that now, they are looking to keep a percentage of their holdings in an asset that is independent of currency movements. What’s also interesting is that it is a spread of nations that are buying. This isn’t just the actions of one or two countries skewing the figures: in the first half of 2019 no fewer than nine Central banks increased their gold reserves by at least 1 tonne.

WHAT EFFECT WILL THIS HAVE?

If you are like many thousands of people around Britain who enjoy owning limited edition gold sovereigns then one thing you will have noticed is that the price of virtually all gold coins has risen. This is due to the increased value of the metal itself.

At Hattons of London we used our considerable market presence to pre-buy gold a few months ago when this started to become apparent, and so we were able to maintain our pricing on new releases.

However, the price has continued to rise, and from September this will start to flow on to our prices. We will do our level best to minimise the impact on our customers.

HOW CAN HATTONS OF LONDON HELP?

Of course, with investors and Central Banks alike seeking out the benefits of gold, you may decide too that you’d like to own more of it. After all, the entire world’s supply would fit in a cube only slightly bigger than a tennis court!

The cube isn’t even half as high as Nelson’s Column in Trafalgar Square!

With the gold price rising so quickly, there’s a lot of activity in the market and we are even noticing shortages now on key British gold coins that are usually in good supply.

To acquire more gold now, contact your Account Manager on 0800 083 5696. The call is free to you, enabling you to explain to your Account Manager what type of gold coins interest you, and they in turn can suggest some gold for your consideration.  Or continue shopping by clicking here.

Joining the 2019 Gold Rush may be easier than you thought.

29th August 2019