With stock markets ending the week in a positive frame of mind following more encouraging economic data from China and the perceived likelihood of a trade deal, the USD strengthened across the board for the third day in succession. This has outweighed the negativity of the India-Pakistan tensions and the failure of the North Korean summit last week. Oil WTI at nearly $58 and gold has fallen back to $1311. GBP has fallen a further 0.5% but is still more than 1% stronger against most pairs than where it started the week-still value there…until the next bout of Brexit jitters is set off once again.
At times of uncertainty market commentators turn their minds to gold as the ultimate store of value that you can put in your money belt and then move around the world unlike the case of less liquid assets.
As we have written gold is currently over $1300 per ounce which sounds a lot for a very small gold unit. 20 years ago it stood at $410 which was the time that Chancellor Gordon Brown sold 400 tonnes or 400 X 35274 ounces=14,109,600 ounces thereby crystallising an opportunity cost to the UK based on today’s price of $14 billion. Hold that thought as gold went up to $2000 in 2011 so that meant that was an opportunity cost of over $20billion to the UK. Nice one Gordon. Not.
Anyway back to today: there are approximately 2 tonnes of coins and small bars in the UK today. At current prices(70548 X 1300/66M)that means that for the 66 million citizens there is only GBP1 of gold in circulation for each UK citizen. The argument goes therefore that gold due to its scarcity in this time of global political uncertainty is set for a run and everyone should buy some.
Needless to say that story is being propagated by…..gold dealers! The UK has 310 tonnes of gold reserves making us #17 in the world rankings. The USA has the most at 8133 tonnes, Germany second at 3374 tonnes and the IMF third at 2814 tonnes.
So before you start loading your money belts, remember that in recent years individual monetary authorities have been amassing gold and that there is plenty of supply in the vaults of the world’s central banks.
Gold bugs perusing the stats may be surprised to learn that South Africa while accounting for approximately 50% of the world’s gold supply, has a relatively lowly 125 tonnes in reserves while
(not so) little Lebanon has 286 tonnes worth $13.1 Billion at today’s prices!
Discussion and Analysis by Humphrey Percy, Chairman and Founder