Gold rockets to all time highs

In recent days, gold prices have experienced a notable rally, influenced by various economic and geopolitical factors. We have seen gold break out past its £2300 barrier meaning that a bullion sovereign contains £541.67 of gold at the time of writing. An incredible feat given this time last year that same coin was worth £380.16, an astonishing 42.48% increase!

Economic Uncertainty

Heightened economic uncertainty, driven by concerns over inflation and potential recessions in major economies, has led investors to seek safe-haven assets. Gold is traditionally viewed as a hedge against inflation and currency devaluation, prompting increased demand. With the UK economy floundering in Americas shadow the problems of central bank illiteracy has brought into sharp focus the need for an economic reevaluation. The rally shows no signs of cooling down, yet hobbyists are increasingly tetchy to move on assets at such high values. The assumption that the price of gold will crash is backing this reticence. An assumption based in very little empirical data. An ever increasing level of financial literacy amongst small scale investors is also a key aspect of golds rally that gets very little analysis. Apps such as Trading212 have brought trading to the masses. It is no longer simply the city brokers and the wealthy, who are investing. Instagram is awash with people hawking financial advice, swelled in followers by those traditionally frozen out of this world desperate to increase their wealth.

Geopolitical Tensions

Ongoing geopolitical tensions, particularly the war in Ukraine and Israel, have created an atmosphere of instability. Central governments push to bank roll various offensives at the same time has placed pressure on Central Banks to fire up the printers once again. Always a positive indicator for an incoming gold rally. Further talks of far reaching tariffs in the US has lead to increased demand for gold as a secure investment in a time of economic certainty amongst many advanced economies.

Central Bank Policies

Central banks around the world have maintained accommodative monetary policies, including low interest rates and quantitative easing. Such measures have diminished the attractiveness of interest-bearing assets, making gold a more appealing option for investors. The worry that holding cash will result in a relentless loss of value is at the forefront of many investors minds. Whilst the US economy is booming, contrary to the current administrations protestations, the rest of the world is feeling the strain of fiscal policies which have hogtied their constituent countries into centuries of bad debt.

Currency Fluctuations

Recent fluctuations in the value of major currencies, particularly the U.S. dollar, have also impacted gold prices. A weaker dollar typically makes gold cheaper for foreign investors, thereby increasing demand and contributing to price rises. This has been offset by talks of trade wars and increased tariffs with China,

Canada and Mexico in recent weeks. Whether these threats play out to the full extent the current administration is threatening remains to be seen, however, investors are rightly cautious as to what the economic outlook will be in the next days, weeks and months. The situation is so fluid that it is anyones guess where this will end. Tariffs on Canada and Mexico have already been frozen thanks to concessions from those countries but it remains a key threat to major economies across the world, with ramifications for those countries not directly targeted.

Investment Demand

There has been a surge in investment demand for gold as exchange-traded funds (ETFs) and other investment vehicles have seen increased inflows. This trend reflects a broader shift in investor sentiment towards tangible assets amid economic volatility. It also speaks of a marked change in how gold is being interacted with by small scale investors. It has become increasingly easy to acquire gold as part of a pension, SIPP or ISA. It is no longer the case that gold is strictly held in physical form. This has allowed those who may previously have had little access to this commodity to take full advantage of its inflationary hedge potential.

Global Impact of Rising Gold Prices

The rise in gold prices carries significant global implications, affecting various sectors and economies worldwide. With rising tensions in the middle east, the new age colonisation of African nations and the ever looming threat of tariffs, it is little wonder so many are seeking a safe haven for their wealth.

Impact on Mining Industries

Higher gold prices can benefit mining companies, leading to increased exploration and production activities. This can stimulate job creation and economic growth in regions dependent on mining operations. Countries that are major gold producers may see their currencies strengthen as gold prices rise. This can enhance their trade balances but may also lead to inflationary pressures in those economies. As we have seen the quasi-colonisation of swathes of Africa by the CCP in China it becomes somewhat unsettling that whilst Africa may begin to ramp up production, that money is not going to end up there. It will swell the coffers of the CCP instead. African nations are being trapped in debt on the promise of a greater tomorrow. One cannot help but feel cynical given the impact the CCP has had in parts of the Caribbean. We are seeing in Jamaica, especially, the grip China has on countries far beyond its borders. In an era where countless people are questioning the imperial past of Britain, Russia, Belgium, Spain and others it seems somewhat blind to watch the colonisation by stealth currently unfolding, without drawing attention to it.

Shift in Investment Strategies

Investors may adjust their portfolios in response to rising gold prices, reallocating funds from equities or bonds to gold-related assets. This shift can influence stock market dynamics and overall investment trends. As mentioned above this has the added element of a swathe of new investors coming into the market daily. It is now easier than ever before to invest. People have the stock market in the palm of their hands now and a myriad options open to them. Gold, as the traditional inflationary hedge, is just one of the asset classes seeing an influx of new buyers. We have seen a sharp uptick in people wishing to buy physical gold. Sovereigns and Britannias have the added advantage of being Capital Gains Tax (CGT) free. This drives the high demand for such coins as it provides a tax efficient vehicle with which to protect one's wealth from the ravishes of inflation and central bank monetary policy.

Global Trade Dynamics

Countries heavily reliant on gold imports may experience trade imbalances as rising prices increase import costs. This can affect currency stability and overall economic health, particularly in developing nations.

In conclusion, the recent rise in gold prices is a multifaceted phenomenon influenced by economic uncertainty, geopolitical tensions, and shifts in monetary policy. Its global implications are far-reaching, affecting industries, currencies, and investment strategies across the world. With increasing rumours swirling that The Bank of England has placed a six week wait on accessing physical gold on account investors are rightly worried. The reason given is that investors are moving gold into the US in order to shelter from any tariffs Trump may wage on the world. A worrying time for the world, an increasingly prominent outlook for gold!

PJA Burke (Durham Coins) 07/02/2025