Gold in UK pounds neared its post-Brexit high overnight as sterling fell sharply on currency markets due to concerns about rising inflation as shown in data today and the outlook for the UK economy.
Gold is up nearly 4% in sterling terms in August and by a whopping 38% year to date. ‘Sterling silver’ has surged by even more this year and is now 56% higher in sterling terms year to date.
‘Sterling gold’ rose or to put it more accurately, sterling fell to £1,045/oz in gold terms – not far from its post-Brexit low of £1,057/oz. The currency has lost more than 2 percent this month versus the dollar, the worst performance among major currencies and nearly 4% against gold.
Sterling hit a 6-1/2-year low against a basket of currencies and Monday’s close against the dollar of $1.2880 was the weakest since June 1985.
Gold in UK pounds surged 20% in the immediate aftermath of Brexit and after a needed correction, has consolidated and is moving higher again. ‘Sterling silver’ surged by even more and is now 56% higher in sterling terms this year showing silver’s currency hedging properties.
UK inflation data showed that the weaker currency led to higher domestic prices after June’s shock vote to leave the European Union.
Rising prices, especially of fuel, helped to push the UK’s inflation rate higher last month, according to official UK figures released this morning. The Consumer Prices Index (CPI) rose to 0.6% in July from 0.5% in June, the Office for National Statistics (ONS) said.
UK economists, most of whom did not expect or predict Brexit in the first place, were as complacent as ever and had not expected any increase in inflation.
More expensive alcoholic drinks and hotel rooms also helped to increase the CPI rate, the ONS said. The Retail Prices Index (RPI) measure of inflation rose to 1.9% in July from 1.6% in June. July’s RPI inflation rate sets the cap for how much regulated rail fares in England, Scotland and Wales can rise by next year.
Market participants and speculators are the most bearish on the pound since records have began. This suggests that sterling could bounce in the short term and indeed there was a small bounce in sterling after the worse than expected higher inflation figures today. However, the outlook for sterling is poor at best.
UK employers have turned more cautious about hiring and the price of homes for sale fell in August, according to surveys that added to signs the economy has stumbled since the Brexit referendum.
Property website Rightmove said asking prices of homes for sale in England and Wales fell in August by the most since November, as post-Brexit uncertainty added to the usual summer lull. The biggest drop was in London property prices, where asking prices fell by 2.6 percent from July.
A UK recession looks almost certain now. The primary question is how deep is the recession and whether stagflation will rear its ugly head which seems increasingly likely.
Gold is acting as a hedge again for UK savers and investors and will protect against falls in stock and property markets and of course the ongoing devaluation of all currencies including sterling.
Gold and Silver Bullion – News and Commentary
Soros Fund Management slashes gold shares in second quarter (Reuters)
Gold Prices (LBMA AM)
16Aug: USD 1,349.10, GBP 1,039.89 & EUR 1,197.33 per ounce
15Aug: USD 1,339.20, GBP 1,037.21 & EUR 1,198.85 per ounce
12Aug: USD 1,336.70, GBP 1,032.60 & EUR 1,199.02 per ounce
11Aug: USD 1,344.55, GBP 1,037.05 & EUR 1,206.06 per ounce
10Aug: USD 1,351.85, GBP 1,035.11 & EUR 1,209.23 per ounce
09Aug: USD 1,332.90, GBP 1,025.80 & EUR 1,201.74 per ounce
08Aug: USD 1,330.00, GBP 1,019.84 & EUR 1,198.86 per ounce
Silver Prices (LBMA)
16Aug: USD 20.04, GBP 15.43 & EUR 17.77 per ounce
15Aug: USD 19.90, GBP 15.40 & EUR 17.81 per ounce
12Aug: USD 19.87, GBP 15.33 & EUR 17.81 per ounce
11Aug: USD 20.21, GBP 15.56 & EUR 18.13 per ounce
10Aug: USD 20.34, GBP 15.55 & EUR 18.19 per ounce
09Aug: USD 19.70, GBP 15.18 & EUR 17.77 per ounce
08Aug: USD 19.66, GBP 15.04 & EUR 17.74 per ounce
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