What a projected £1.5tn in UK debt means for the price of gold

Last week we got the Autumn statement from the chancellor, which can be summed up with the following points:

■Spending to increase 12% in four years
■from 2010 to 2017 the national debt will double
■Osbourne to borrow 55% more Darling over the life of this parliament

We also learned that the now projected level of UK debt in March 2017 will be £1498bn, this of course is the ‘massaged’ number which looks the ‘best’ – It doesn’t include unfunded liabilities (stuff the government has promised to pay in the future but hasn’t worked out how to pay for yet), when you do that the real debt is a staggering £4.2tn. It also doesn’t include all the money the UK taxpayer ‘gave’ to bailout the banks, when you do that the figure is well over £2tn.
But for the sake of this analysis we’ll use the ‘massaged’ number of £1498bn. There has been as a very close correlation between debt and the gold price of the past 60 years. Simply put the higher the national debt the higher the price of gold.






First let’s take a look at the previous bull market in gold which in the UK started in 1966 and ended in 1980.
In 1966 the national debt of the UK was £31.34bn. In 1980 that number had risen to £98.2bn – a rise of 215%.
In 1966 an ounce of gold in the UK was just £12.50 (yes it really was that cheap) and by 1980 the gold price peaked at £371 – a rise of more than 2800%.
In 2000 the national debt was £345bn, today that number stands at well over £1tn, a rise of 190%. Gold in 2000 was around £185, today gold trades around £1070, a rise 478%, a much smaller rise than back in the previous bull market.
It’s probably more useful to look at the national debt as a ratio to gold to get a good idea of just what is going on.




We can see that from 1950 to 1970 the ratio between debt and gold was very stable, on average it took £0.45 of debt to cover 1 ounce of gold.
But this all changed in the 70s and the ratio started to rise rapidly. It peaked in 1980 when the ratio got as high as 3.78. There was then a steady decline until around 2000 when the ratio has started moving back up again.
But note that even despite the rise in gold over the past 10 years the ratio is still very low. This is because the debt increase has been rising faster than the rise in the price of gold. In fact over the past year or so we can see that there has actually been a downturn in the ratio.
So what sort of price levels would gold now have to reach to get anywhere near that 3.78 ratio level? Today it would take a gold price of around £4500 to get back to that ratio, but in a few years when the national debt is projected to hit £1.5tn it will take a gold price of more than £5,500 to match the ratio from the 1980’s.


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Indian government tries to promote ‘non-physical’ gold investments in an attempt to reduce bullion demand.

 

                                                        

 

 

The indian people’s appetite for gold is well know, they are after all the biggest buyer of gold on the planet.
However most Indians save in the form of bullion and jewelry, something that the Indian government is trying to change. Back in March we reported that the Indian government doubled the import tax on gold bullion. And also in March we reported on the Indian media ‘bashing’ gold by claiming that buying gold hurts the Indian Economy.
But despite all these attempts above to restrict physical gold buying in India it seems it is not enough for the Indian government. Now it’s trying to push people into buying ‘non-physical gold’.

New Delhi: Sounds like we are heading back to the 1962 days when the Indian government enacted the Gold Control Act, which prohibited the citizens from holding gold bars and coins. Under the Act, existing holdings had to be compulsorily converted into jewellery and also be declared. Besides, only licensed dealers were allowed to deal in gold bars and coins. The trigger to enact this law was the 1962 Indo-China war, which eroded much of the country’s foreign exchange reserves mainly on account of people making frantic purchases of gold in times of crisis.
It was only during the much vaunted liberalisation process, kicked off in 1992, that the government rolled back this Act and allowed the import of gold for a duty payment of Rs.250 per 10 gram. The decision was taken largely on account of the unorganised market for gold that had emerged during the period, and gave way to smuggling and black marketing in the precious metal.
Today, years later, the government seems to be doing just the same, though in an alleviated fashion by mulling over schemes like gold deposits, accumulation plans, gold-linked accounts and pension products, which dissuades the investor from putting in their money in buying physical gold.
In its Mid-Year Economic Analysis tabled in Parliament today (December 17), the government said the gold-backed products, which it is considering, will help the investor enjoy the benefits of investment in the metal without investing in the physical commodity.

Great spin in this article. Yes, the Indian government is actually being ‘helpful’ by getting people to invest in gold ‘without investing in the physical commodity’. The article continues:

The government contends that the schemes are being considered mainly due to rising imports of the yellow metal which is to blame for the high current account deficit.
The current account deficit (CAD), which occurs when a country’s total imports are greater than total exports, has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $21 billion on the back of rising oil and gold imports.
“Now, gold-backed financial instruments in the form of modified gold deposits and gold accumulation plans, besides gold-linked accounts and pension products linked with the precious metal, are some measures being considered to reduce the attraction of a direct investment in bullion and jewellery in the domestic market and check a substantial rise in imports,” the Mid-Year Economic Analysis said.
However, gold-linked investments would have to be monitored to see whether the overall demand for the metal actually falls, it said.

So it is unambiguously it is the policy of the Indian government to reduce the physical gold demand in India.

Speaking on the proposed moves to curb gold imports, Finance Ministry’s Chief Economic Advisor Raghuram Rajan said: “We are worried about gold imports. It is an unproductive instrument. The way to curb holding of gold is to create more attractive financial instruments.

That’s right, one of the safest ways to store value over the last couple of millennia is now reduced to an ‘unproductive instrument’ by the Finance Ministry in India.

“Some gold-linked instruments have been talked about by the RBI but potentially there could be other financial instruments to attract investment.”
“We are worried about CAD. We want to take steps to monitor it,” Rajan said on the government’s worry on high CAD,” Mr. Rajan said
It is not that the government’s need to curb gold imports is newfound. Earlier, the Reserve Bank levied a slew of curbs on gold purchase and financing as imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2 per cent during the period.

We would suggest that the most crucial time that you should be holding physical gold and not paper-gold is precisely when your government is trying to ‘encourage’ you not to. One thing to watch in 2013 will be just how successful the Indian government can be in this attempt.

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CAMBIA TU VIDA, CAMBIA TU ECONOMIA CON EL ORO

 

GOLD 4 CHANGE no es solamente la empresa Líder en el comercio electrónico del oro, es mucho más, es un sueño de un grupo de visionarios que está cambiando la vida de mucha gente. Hace falta trabajar y mucho, nadie te regala nada, ni quisiera 1 euros, hay que luchar cada día, no tenemos jefes que nos digan lo que tengamos que hacer, somos dueños de nuestras vidas, podemos fracasar o ganar, vencer el miedo a lo desconocido, nos pondrán trabas los amigos y la familia, es cierto, pero también nos felicitan aquellos que creen en nosotros, en ti. Hay que invertir, cierto también, es un negocio, que se pone en marcha inclusive con tan solo 50€. Sigues en tu misma situación o decides actuar? Este es nuestro correo, deja tu estado mental negativo, únete a un grupo de ganadores y cambiaremos tu vida a partir de ahora mismo, solo necesitas de una conexión a internet.

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UK & international delivery available

Most clients choose to take advantage of our secure storage which is fully insured. Where delivery is preferred, it is essential that customers use a secure delivery address where only trusted people are able to sign for your package. The liability of Gold Made Simple ends when ANYONE signs for your package at the delivery address provided by the customer at the registration stage.
Delivery to all UK addresses is available at the below prices.

• Up to 250 grams £15.00
• 250 up to 500 grams £17.00
• 500 up to 750 grams £20.00
• 750 to1000 grams £25.50
• Full market bars and International delivery price upon request.
 

We can deliver outside the UK but we will provide you with an individual quote based upon the weight of your gold bar and your exact delivery address.

Gold4Change LLC acquires its golden bullions and bars certified as "Good Delivery Gold"

For UK delivery we use Royal Mail Special Next Day Delivery or a secure courier service, both of which are fully insured. Once your package has been dispatched we will notify you by email and provide you with a tracking number. We aim to despatch within 2-3 working days but during periods of unusually high demand the despatch time can be up to 2 weeks.
You will need to sign for your delivery but if you are not available the package will be returned to your local sorting office. A card will be left telling you where to collect it from and you will require proof of identification.

 



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Gold price trading just below $1700 as investors look nervously to last year for clues on direction

The gold price is trading just below $1700 as we head into the weekend. Yesterday gold managed to briefly trade above $1700 but every-time was beaten back.
There seems to be some nervousness in the gold market at the moment which is preventing any buyers to enter the market with any real conviction. If we take a look at what was happening exactly a year ago it’s easy to see why.
On November 30 2011 gold topped out around $1750 (On November 28 2012 gold tops out around $1750).
On December 9 2011, a Friday, gold was trading right around where gold is trading today ($1700). However on the Monday (12 December 2011) gold started selling off and it closed out the day down nearly 3% at $1665.
This was the start of some big selling that took gold all the way down to $1550 on December 29. Gold ended up finishing 2011 up 10%. At one point in August 2011 gold was up 35% for the year.

Gold $

 

So fast-forward one year and here we are again, trading right around $1700, after peaking a couple of week’s back at $1750, going into a weekend with only a couple of weeks left in the year. It’s easy to see why the bulls would be feeling a hesitant.
There is one very crucial difference this time round. As it stands gold is up 10% for the year already and a fall to similar levels like last Christmas would mean gold posting its first down year in 12 years.

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Why Gold is popular as a pension investment

Gold is often considered to be an attractive asset to hold within a pension in view of its reputation as both a 'safe haven' asset and also potential for capital growth.

With interest rates on cash accounts typically lower than inflation rates, cash savers are seeing their buying power being eroded.



Gold has averaged growth of around 17% per year for 11 consecutive years and many experts consider that significant capital growth will continue for the foreseeable future, in view of the economic climate, quantitative easing, sovereign debt issues, banking crisis and inflationary pressures. 

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Nonostante la recente discesa, investire in Oro, a scopo di diversificazione, rimane la scelta migliore per proteggere il proprio capitale.

DOPO AVER REGISTRATO UNA FORTE RIPRESA nei mesi scorsi, in metallo giallo sembra aver perso il suo potenziale di crescita anche a seguito dell’ultimo crollo. Ma le cose stanno diversamente.

Eravamo con i grafici aperti che mostravano il consueto andamento del prezioso metallo, quando ad un certo punto abbiamo assistito ad un crollo delle quotazioni. Forse è un caso di insider trading ovvero qualcuno che ha saputo prima le stime sulla crescita del Pil Usa, (diffuse giovedì) riviste al rialzo del 2,7% rispetto alle precedenti rilevazioni al 2%. Ma questa è una mia personale opinione.
Chi è abituato a solcare i mercati finanziari, spesso si trova di fronte ad episodi del genere in cui la volatilità schizza alle stelle improvvisamente. Succede in tutti i segmenti dei mercati finanziari: azionari, valutari, materie prime. Quindi eravamo preparati anche a questo evento.

La volatilità è un concetto semplice quanto astruso e viene misurata con il Vix. In estrema sintesi, non me ne vogliano i colleghi tecnici, la volatilità in ambito finanziario indica la variazione di prezzo di uno strumento quotato, azione, valuta, o commodity, nel tempo.
Più ampie sono le oscillazioni dei valori nel periodo di osservazione preso a riferimento, maggiore sarà la volatilità. Quando sui mercati dominano le fasi speculative, la volatilità dei prezzi dei titoli è decisamente più alta rispetto alla media. Le variazioni di prezzo dei titoli non rappresentano un fattore negativo, ma anzi spesso una caratteristica che rende i mercati finanziati appetibili per il cosiddetto trading, ovverosia per l'apertura e per la chiusura da parte degli investitori di posizioni al rialzo e/o al ribasso in un tempo relativamente breve.
L’oro è un bene di per sé statisticamente meno volatile degli altri, anche se negli ultimi periodi questa caratteristica sembra venuta meno. Se la scorsa settimana si è conclusa con un notevole movimento rialzista nel settore dei preziosi che ha portato l’oro in prossimità di $1.750/oz, questa settimana lascia presupporre che resterà caratterizzata da questo movimento contrario al precedente.

Movimenti violenti, che spesso sono giustificati dalla vendita da parte di grossi broker che hanno investito in oro di quantità enormi di contratti futures. Mercoledì l'oro ha visto un massiccio ordine di vendita 24 tonnellate (7.800 contratti) alle 08:20 ora di New York. Il metallo prezioso ha perso più di $30 all’oncia in un’ora mercoledì pomeriggio, perdendo l’1,5% in pochi minuti. I volumi di scambio al Comex sono stati circa il doppio rispetto alla media di 250 giorni, secondo Reuters.
“L’oro ha probabilmente subito una pressione aggiuntiva data dagli stop loss tecnici attivati automaticamente” riporta il CME, che non reputa valida l’ipotesi che il sell-off sia stato prodotto da un errore di digitazione di un trader nell’immettere un ordine di vendita.

In ogni caso i fondamentali che compongono il mercato dell’oro, rimangono positivi e il bene rifugio ha ripreso la sua marcia rialzista da quando Obama è stato confermato alla Casa Bianca, dopo le elezioni presidenziali americane del 6 novembre scorso. Da allora, grazie anche al maggiore appetito per il rischio sui mercati finanziari, la quotazione dell’oro è aumentata in modo costante. Per fine anno molte banche d’affari attendono un nuovo test dell’area di resistenza di 1.800 dollari, mentre all’inizio del 2013 potrebbe esserci un allungo verso i massimi storici di area 1.921 dollari l’oncia.
Il prezzo dell'oro è mosso nel lungo termine, da una significativa domanda asiatica così come dalla forte domanda delle banche centrali come confermano anche le autorevoli analisi di WGC e GFSM.
Quando si decide di investire in oro fisico invece è necessario NON concentrarsi esclusivamente sul fattore prezzo, ma piuttosto sul valore che questo metallo prezioso incorpora in se stesso. Una qualità che gli ha conferito la sua storia lunga di 2.500 anni, che non può essere annullata da un singolo movimento giornaliero per quanto intenso esso sia.

Il suo valore non è semplicemente un fattore di domanda e offerta nel breve termine. Gli investitori in oroa più lungo termine non devono scoraggiarsi: le motivazioni per l'acquisto di oro sono tra le più favorevoli che mai. E' necessario avere pazienza. Una grande azienda che offre sconti del 70%, è senza dubbio una eccellente opportunità di fare affari con lingotti e monete d'oro, consultando a GOLD4CHANGE LLC.

 

 

 

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