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Category: Bullion Bulletin

Bullion Bulletin: The receding pivot

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Those hoping for the arrival of the long-discussed Fed ‘pivot’ (a reversal of the US central bank, the Federal Reserve’s, policy of ever-higher interest rates) will be disappointed, following publication of the minutes of December’s Federal Reserve policy meeting.

In the past, higher interest rates have tended to depress demand for gold (and hence lower its Dollar price) as gold bears no interest. Thus the outlook for 2023 of further Fed interest rate rises, if past precedent was followed, ought to weigh on the Dollar gold price. And yet, and yet…

Confronted by inflation rates rocketing to a 40-year high last year, the Fed has determined to cool the US economy; in 2022, it thus raised benchmark lending rates seven times, taking them to 4.25%-4.50%, the highest since 2007. Given that the labour market is still running hot – 1 .7 jobs were available for every unemployed person in October – the Fed’s policymakers still fear inflation more than recession.

The minutes reveal that Fed policymakers believe “a restrictive policy stance would need to be maintained” until clearer and more decisive evidence that inflation is on a sustained downward path. None of the participants in the meeting thought it appropriate to begin reducing the federal funds rate target in 2023. The Federal Reserve expects higher interest rates to remain in place for “some time”, as it continues to see inflation as the major threat to the American economy, despite increasing fears over a potential recession.

US consumer prices rose at an annualized rate of 7.1% in November, the lowest in 15 months and against what may be the peak, of 9.1%, in June. The next consumer price index figure, for December, will be published on 12 January. However, even though inflation is slowing in the US it is still currently more than three-and-a-high times higher than the Fed’s ‘target’ of 2%/year. The ‘terminal’ rate – the point at which the rate will come to rest before the Fed starts reducing rates – is now expected to settle some time in 2023 at around 5%.

And yet after the minutes were published gold reached its highest in seven months; investors seem eager to sniff even the faintest scent of a ‘terminal’ point. Back in March 2020 the federal funds rate was 0%-0.25%; 2022 was the year when the Fed started raising interest rates and US Treasury Bills became relatively more attractive for investors. Even as the fed funds rate climbed in 2022 the Dollar gold price kept its head up – over the year it made a modest gain of 1.6%.

If the Fed continues to tighten monetary policy too far the risk is that a recession will happen. High levels of government debt – $31.5 trillion in the US for example – means that higher interest rates are as painful for governments as mortgage-holders. US interest payments last year were probably around $399 billion and could triple over the coming decade. Even at the historically low 4.50%, the US is forced to pay money that could be much more useful elsewhere. A commodity analyst at UBS reckons that “it’s too early to call for a Fed pivot… it’s not yet time to buy gold… in 2023 there will be a period where it’s interesting to buy gold when the market starts to smell that the Fed will cut interest rates”.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Russia’s Wealth Fund

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Just before the New Year celebrations Russia’s finance ministry sprang a piece of news that, while intriguing, should surprise no-one. It doubled the amount of Chinese Yuan and gold its national wealth fund is permitted to hold. In order to make investments in the fund “more flexible” (according to the finance ministry) it raised the potential share in this fund of Yuan to 60% and gold to 40%.

Almost simultaneously the country’s largest bank, the majority state-owned Sberbank, said it would start to issue gold-backed digital financial assets (DFAs). Alexander Vedyakhin, first deputy chairman of the Executive Board of Sberbank explicitly linked the gold-backed DFAs to a broad ‘dedollarization’ which he posited is now happening.

Russia has been steadily accumulating gold over the last decade; its gold-buying has been given an extra impetus by the sanctions imposed by the US and other countries after the invasion of Ukraine. Its interest in digital assets has fluctuated wildly in the past couple of years. In 2017, President Vladimir Putin said Russia would develop a digital currency called the CryptoRuble, to be issued by the Russian government. It was reported in 2018 that one of Putin’s economic advisors, Sergei Glazyev, said during a government meeting that the CryptoRuble “suits us very well for sensitive activity on behalf of the state. We can settle accounts with our counterparties all over the world with no regard for sanctions”. The CryptoRuble was due to be tested by the Russian public in 2022 but it’s yet to appear. Following the Ukraine invasion one of the sanctions imposed against Russia was to eject it from the SWIFT payments platform, to which Russia’s finance ministry responded by saying it would legalize the use of virtual currencies in cross-border payments, while they would remain illegal for domestic usage.

According to a Russian-based economist, the Yuan “is becoming the ‘new dollar’ due to its growing liquidity and relatively low volatility”. Sanctions imposed on Russia have been a double-edged sword; while the richest Russian oligarchs lost almost $95 billion in 2022, the US Congressional Research Service (CRS) admitted in December that sanctions have “not delivered the economic ‘knock out’ that many predicted” and that they have “contributed to disruptions in global supply chains, higher global commodity prices, and a slowdown in global economic growth”.

Perhaps most importantly, they have so far failed in their main task – forcing Russia to abandon the invasion of its neighbour. It seems likely that this war will drag on through 2023, and that Russia will continue to bolster its foreign reserves by accumulating further gold stocks from its own mining (around 300 tonnes a year) and elsewhere. The National Wealth Fund, which originally was established to help cover deficits in the national pension fund, will continue to be used to help support the fight.

Bullion Bulletin: What price 2023?

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In the countdown to 2023 analysts have fingered their abacuses and come up with price forecasts for gold next year. Capturing more media attention than most has been the Danish investment bank Saxo’s “outrageous” set of predictions, including that spot gold “rises above” $3,000 an ounce. But given that another of Saxo’s predictions is that French President Emmanuel Macron decides to resign and retire from politics in early 2023 that $3,000/ounce looks remote.

Mind you, Saxo is not the only extreme forecast. Zoltan Pozsar, investment strategist at Credit Suisse bank has said it is “not improbable” that gold could reach $3,600 an ounce if Russia responds to the G7’s $60/barrel price cap on Russian crude oil by accepting payments in gold. This too seems a remote possibility – but analysts thrive on media attention, Pozsar got lots with this conjecture.

As for this year, few could have predicted or imagined one of the most dramatic events, Russia’s invasion of Ukraine. The gold price has seen a remarkable price range this year (peaking at almost $2,044/ounce on 7 March, falling to $1,627.84 on 25 September and now trading at $1,788 on 13 December) and few forecasts at the end of last year captured that range.

But given the dramatic events of the past 12 months – inflation in the US and UK the highest in more than four decades, the tremendous spike in energy prices, a belated catch-up by many central banks that had previously swallowed the ‘inflation-is-transitory’ line, record gold-buying by central banks – that’s perhaps not surprising.


Glint cannot and does not give investment advice and it does not make gold price predictions – a relief, given the high chance of getting it wrong. But if we look at what has happened this past year, it’s safe to say that gold has served one important purpose – it has kept its head while all about it seem to have been losing theirs. In US Dollar terms, by the start of December it was down 3.3% according to Incrementum, the asset manager, but in other major currencies was up, by 8.5% in Pounds Sterling and 16% in Japanese Yen. The S&P 500 meanwhile has lost almost 15% in 2022; the Dow Jones Industrial Average is down by almost 5% this year. The purchasing power of major fiat currencies such as the Dollar or the Pound have been significantly eroded by this year’s inflation. Gold is often referred to as a ‘defensive’ asset, i.e. one with lower volatility, more stability. The cryptocurrency market this year has experienced a huge crash, with the most popular, Bitcoin, losing about 70%.

No-one can know what the New Year will bring. The shiniest thing you can buy this holiday season may not be tinsel for your tree – for Gold is security and Glint its key. At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Own gold the best way

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What is the best way to own gold?

Allocated gold, of course.

What is allocated gold and why is it the best way?

Let’s take a fictional example to get an answer – the case of three gold buyers, person A, person M and person Z.

A decides to invest in a kilo of gold but doesn’t want to run the risk of being burgled and possibly having the gold stolen. She does a quick internet search and discovers that gold can be bought through an exchange traded fund (ETF). The average expense ratio for gold ETFs is 0.65%. A has a bit of financial sophistication so knows to avoid an actively managed ETF (which has a higher expense ratio so costs more to sustain) and also to avoid leveraged gold ETFs, which can magnify both gains and losses. A just wants to own a kilo, and not be bothered. A chooses what seems to be the safest option and invests enough to secure a kilo of gold into an ETF. A is ignorant of the wider risks and possibilities.

Person M however realises there are possible risks with a gold-backed ETF. Such ETFs are securities which are designed to track the gold price. Buying a gold ETF does not give ownership of any physical gold – gold ETFs function similarly to stocks and currency – you don’t get access to physical gold, all you get is a piece of paper stating how much gold your investment is linked to. M understands that there is counter-party risk involved in buying a gold-backed ETF. Multiple people are involved in managing the ETF, which increases the risk of something going wrong.

If you buy a gold-backed ETF you don’t own any gold – you just own a share in the trust that runs the ETF. The ‘gold’ you have bought is unallocated. Unallocated gold is the most widely traded form of gold in the world. But it hides a way of advantaging as provider – usually a bank – by subjecting buyers to a risk they frequently remain unaware of. Your relationship is with the bank’s overall pile of assets, not with any specific pile of gold. The bank’s small gold reserve would be diluted by non-performing bond portfolios and other assets which don’t sell well in a crisis. So it is important not to be impressed by unallocated gold, or by it being physically stored in a bank’s vault, or by it being checked daily by bank regulators. Regulators are checking it to make sure the bank maintains a liquid reserve, and they are not interested in your entitlement as a bullion creditor.

Which means that if the ETF for any reason has to close up shop, you will find yourself at the end of a (potentially very long) line of creditors who want re-paying. And you pay fees for owning an ETF which will eat into the value of the gold investment. So M decides to buy some physical gold, pay the hefty premiums that come with bullion coins, shoulder extra costs for insurance, and be able to look at the gold whenever desired. M doesn’t consider potential obstacles for the future, such as selling the gold. Any future buyer might be suspicious – where did the gold come from? Has it been tampered with? Can M be trusted?

Z is the canniest of all three buyers. Z decides to buy gold via Glint. Glint provides its clients with allocated gold, making the client the outright owner of gold and you are no longer a creditor. Your allocated gold is your property; it can’t be used as anyone else’s reserve, so with allocated gold you get proper protection from systemic failure. And Z’s gold can be used as money, spent on everything from weekly shopping to an expensive holiday, and sent to other Glint clients. It’s the smart way to own gold – safe in Zurich vaults, owned by you, and as liquid as fiat cash.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Sliding dollar on hopes of inflation easing

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The US Dollar slipped from a 20-year high, falling some 4% against a basket of six other currencies, although it is still up more than 10% since the start of the year. The Dollar spot price for gold responded by gaining 0.6%.

The weakening of the Dollar is due to financial markets taking the view that inflation in the US is easing and therefore interest rates may not go up as rapidly or as high as formerly expected.

All eyes are on 13 December, when the consumer price index (CPI) data will be published. That data will reveal the annualized inflation rate for November; October’s CPI figure was 7.7%, down from 8.2% the previous month. June’s 9.1% figure was the highest (so far) for 2022 but it has crept lower (8.5% in July, 8.3% in August) since then; many are convinced the downward trend will continue.

13 and 14 December also see the next scheduled meeting of the Federal Open Market Committee (FOMC), the body which sets US interest rates. Opinion is sharply divided as to whether the FOMC is more ‘hawkish’ (i.e. is in the frame of mind to raise rates by 0.75%, which would be the fifth successive such rate increase in 2022) or more ‘dovish’ and will be content to raise rates by 0.50%. HSBC has sent its clients a note saying the Fed’s hiking cycle is ending and that “it has peaked”. The Federal funds rate is now between 3.75% and 4%.

The strong Dollar looks as though it will eradicate more than $10 billion from the earnings of US companies in the third quarter. A so-called ‘Fed pivot’ (or change of direction, away from pushing rates up) looks unlikely in December. The Fed wants to ‘cool’ inflation and bring it back to close to its 2%/year target, but various data studied by the Fed are still showing signs of a buoyant US economy; for example US retail sales in October recorded their biggest monthly increase since the start of 2022. The jobs market is close to the tightest it has ever been since records began.

The Fed’s chairman, Jay Powell, said in August that the central bank would “keep at it” (i.e. stick to putting rates up) until it got price pressures under control, but it’s as yet unclear what “it” will require. We may learn a little more from Powell on 30 November, when he is due to speak at the Brookings Institute. So far this year gold has been relatively successful; the S&P500 is down some 17%, the total capitalisation of the cryptocurrency market is down 69%, while the Dollar price of gold is down less than 5%, despite the higher interest rates and the Dollar’s currency strength.

At some point the Fed will perform its ‘pivot’ and start to ease off the interest rate accelerator; as a global recession bites it will find it necessary even to start cutting rates. Investors who opted for cryptocurrency will be thinking twice about the security of the crypto world following the ghastly demise of FTX. Gold is well positioned to benefit from the Fed’s change of heart and the thump to crypto’s solar plexus.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: Gold for oil

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Ghana vies with South Africa for the title of Africa’s biggest gold producer. Last year Ghana lost out, as its production declined from 4 million ounces in 2020 to 2.8 million ounces. South Africa dominated global gold production until 2009, when China displaced it from the top slot. Ore grades are in decline in South Africa and about two thirds of gold mining operations there in 2018 were either marginally profitable or loss-making.

Despite last year’s slowdown in its gold production, Ghana now says it is planning to buy crude oil and derivatives with gold rather than US Dollars. It plans to start paying in gold in the first quarter of 2023. Ghana’s Vice –President, Mahamudu Bawumia, said the new policy “represents a major structural change” and “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency”.

Its currency, the Cedi, has so far this year been the world’s worst performing currency, dropping 57% against the Dollar. Ghana has ordered large gold-mining companies to sell 20% of their refined gold – for Cedis – to the country’s central bank.

Small-scale miners have also been instructed to sell their gold, also for Cedis, to the state-owned Precious Minerals Marketing Company. The west African country said in August this year that its central bank, the Bank of Ghana, would start buying domestically produced gold. Inflation in Ghana is currently running at more than 40% a year, four times greater than the central bank’s target; the country is currently negotiating with the International Monetary Fund (IMF) to obtain a $3 billion support loan. At the end of September Ghana’s fiat currency reserves fell to around $6.6 billion, against $9.7 billion at the end of 2021. Ghana’s annual import bill exceeds $10 billion according to the finance minister. His deputy has said the government is considering a ‘haircut’ on the debt – i.e. devaluing it – by “up to 30%”; Ghana’s total public debt is about $54 billion. Even before the Russia-Ukraine war Ghana was already classified by the World Bank as being at high risk of debt distress.

Ghana is an oil producer, and exports crude oil, but its only refinery has been closed following an explosion in 2017. It imports around 80% of its finished petroleum products, such as diesel.

Emerging market countries such as Ghana are increasing their official gold holdings; according to a survey by the World Gold Council (WGC) earlier this year found that of 57 central banks a quarter planned to add more gold.

Several points can be made about Ghana’s decision to pay for its refined oil product imports in gold. The first is that gold companies with mines in Ghana, such as Newmont or Gold Fields, will have mixed feelings about the decision. While they will probably welcome the official endorsement this gives to gold-as-money, they may well dislike being forced to take a sliding currency like the Cedi as payment. It will force them to think more, spend more, about currency hedging.

The second is that Ghana’s action is yet another step in the de-dollarization of the global economy. Whether this is by choice or force of circumstances is a different question. Whether other countries with a flourishing gold production sector, who need to import crude oil, may follow in Ghana’s footsteps is another open question. All that can be said with certainty for now is that this seems another chip away at the US Dollar’s global dominance, and is another fillip for gold as a universal currency.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: No free lunches

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We all love free money, right? A survey of 1,500 voters in the US recently published by Newsweek found that 63% supported the idea of new stimulus money being distributed, to combat inflation. Just 18% disagreed. But there’s usually a catch; rarely is there a free lunch.

The sample in this poll was admittedly a tiny proportion of US citizenry – but if it’s at all representative it reveals a remarkable ignorance of basic economics, as well as a disturbing trend.

The economic ignorance first.

Americans are flush with cash. According to Bloomberg, American households in late 2019 had about $1 trillion in currency and accounts. By early 2022 that was $4.7 trillion. The federal government put almost $1.5 trillion directly into Americans’ pockets over the course of 2020 and 2021 in the form of stimulus checks and supplementary unemployment benefits, with other aid programs indirectly delivering even more. This giveaway was huge, in the region of $5 trillion during the pandemic – following the $3 trillion after the 2008 financial crisis, while the Federal Reserve pushed interest rates to zero, making credit cheap. All that fiat-fired wealth arriving in American’s bank accounts; to some it must have felt like paradise.

All this extra cash went into different things – the stock market, houses, consumer durables such as automobiles – precisely as supply of those things either halted or slowed, or was in any case limited. Unsurprisingly some of the free money went into savings – in 2020 (the height of the pandemic) the US personal savings rate was 17%, the highest since 1944. As the US economy has started to slow that savings rate has dropped to just above 3%, the lowest it’s been since just before the Great Recession. US consumers are still spending freely, around $17.6 trillion annually in September.

But inflation has followed, as night follows day. Inflation very easy to understand – it’s too much money hunting too few goods. The world produced less of everything (from palm oil to microchips) during the pandemic, yet people still needed goods and services and had the money to buy them, even though they were in short supply. All that happened was that prices went up as the demand remained the same as usual.

The worrying trend is less easy to explain. Having experienced what the state can do in financial or health crises, Americans perhaps are increasingly looking to Washington D.C. for financial support, as the Newsweek poll hints.

Take student loans. No one disputes that the student loan scheme in the US is an expensive mess, but President Joe Biden’s plan to forgive student loans of up to $20,000, though well-intentioned, is a worrying straw in the wind. The Congressional Budget Office (CBO) calculates the total student loan debt to be $1.6 trillion among 43 million borrowers. Biden’s plan would eliminate around $430 billion of that, says the CBO. Loan payments have been on pause since March 2020 as part of the Covid-19 relief schemes. Whether the loan forgiveness finally sees the light of day seems to be in the hands of the courts for now.

Generosity from the state isn’t just for the US. In the UK, there are more than 50 different benefits available from the state. In the latest “mini-Budget” the finance minister, Jeremy Hunt, said that benefit payments and state-funded pensions would next April rise by the rate of inflation in September, which was 10.1%. With UK inflation racing at above an annualized 11% this gesture by the government will no doubt be welcomed by millions but given that the British economy will shrink next year, the question is – where will the necessary extra money come from? The ‘free’ money will be delivered at perhaps the worst time for the economy since the 1970s; interest payments on the UK’s debt will have been more than £120 billion this year, 4.8% of gross domestic product (GDP), more than double last year’s payment.

Bullion Bulletin: Central banks step up gold buys

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The latest Gold Demand Trends from the World Gold Council (WGC), covering the third quarter of 2022, reports that demand was 28% higher year-on-year and totalled 1,181 tonnes. Demand so far this year is 18% higher than the same period in 2021 and is back to pre-pandemic levels.

This increase in demand begs one question: if demand is so much higher then why is the gold price 7% down since the start of the year? But that’s the price in US Dollars. If we consider the Pound Sterling gold price, that’s up by 8%. If we price gold in Japanese Yen, then this price has risen by more than 16% since the start of 2022. The discrepancy is simple. Like most commodities the generally used reference price for gold is the US Dollar, and so far this year the Dollar has been exceptionally strong – against other currencies it’s gained in value by some 20%. And the reason for the Dollar’s strength is that investors have seen US interest rates go higher, and they don’t like what they see of the prospects for the global economy. In times of crisis – a word that has come into its own recently – investors flock to what they imagine is the least worst, most liquid asset available, one that has strong government backing – and that has long been US treasury bills. These bills, because they are backed by the US government, are seen as riskless.

That suggestion seems to be borne out by the latest Gold Demand Trends, which says that investment demand for gold was 47% down year-on-year, at 124 tonnes.

But it’s the huge increase in gold buying by central banks, which reached a quarterly record of 399 tonnes, almost double the previous record, which is on the surface puzzling. Only a quarter of those tonnes went to publicly identifiable institutions; there were some “mystery buyers” said Bloomberg. Most central banks inform the International Monetary Fund (IMF) about their gold transactions, but this is a convention, not a requirement.

There are a variety of ‘suspects’ who might have an interest and the wealth to buy such a weight of gold. Russia has been largely excluded from the international payments system since its invasion of Ukraine and it is clearly interested in toppling the Dollar as the international reserve currency, as is China, which is thought to have vast gold reserves. Russia has also profited hugely from the tremendous rise in crude oil and gas prices. So it has the means and the motive to buy gold as a bulwark against uncertainty.

The US Dollar price for gold is unlikely to improve rapidly or soon, so long as the US Federal Reserve remains in the mood to push interest rates higher. With inflation nudging 9%/year it will continue doing so. The Swiss bank UBS has sent a note to clients this week asserting that the gold price will rise by 13% by winter 2023, largely as a consequence of an assumed cut in interest rates by almost 2%. UBS says “we think gold should benefit [from the Fed’s interest rate cut] and therefore holding long positions in gold will offer an attractive risk-reward as the tightening cycle comes to an end”. A cut in US rates will weaken the Dollar – and that will strengthen the US Dollar gold price.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Bullion Bulletin: India wants to mobilize its gold

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In 2015, the Indian government introduced its ‘Gold Monetisation Scheme’ (GMS) which hoped to entice citizens to deposit their gold with a bank designated by the country’s central bank (the Reserve Bank of India or RBI) in return for interest payments of up to 2.5%/year. This is the sixth such scheme introduced by the Indian government since the first, in 1962.

According to Bloomberg, the GMS “has been a resounding flop”, drawing out just 25 tonnes of the 25,000 tonnes which the World Gold Council (WGC) estimates is held by individuals and temples in the country. Now the government is reinforcing efforts to persuade its citizens to hand over their gold.

The reason behind this extra effort to boost the GMS is India’s massive trade deficit, which reached $192.41 billion during April 2021-March 2022. India’s obsession with gold means it is the third biggest import (after crude oil and its derivatives, and electronic goods). In the last fiscal year of April 2021-March 2022, India’s gold imports rose in value by more than 33% year-on-year.

There are several strands to India’s appetite for gold. One is cultural – gold is closely associated with religious festivals such as Diwali. Gold is regarded as reliable – it can’t be eroded like paper money and if it is held in a private ‘locker’ then it is beyond government interference and the tax authorities. Gold jewellery is used as both wealth and adornment in marriages, and generally forms part of dowries, which are still commonplace in India. Gold demand in India remains strong – the WGC reports that gold jewellery demand there in the third quarter of this year rose by 17% year-on-year to 146.2 tonnes.

In July this year, the government raised the effective import duty on gold from 10.75% to 15% in an attempt to stem the growing demand for gold. The current account deficit has helped push the rupee to its lowest ever, almost 82 to $1.

The renewed drive behind the GMS is unlikely to be successful in its aim of cutting gold imports, for several reasons:

• Perhaps most important is the fact that it pays little attention to why Indians buy gold. If an Indian citizen hands in their gold to a bank for the GMS, the government takes the gold, melts it down and recycles it. You will not get your gold back in its original form – so any sentimental attachments to a particular piece or design will be lost.
• For many Indians gold is a reliable form of saving for emergencies. Confidence in the stability of the Rupee is faltering.
• The interest payable in the GMS is in paper money, not gold.
• The rate of interest that can be earned on gold deposits may not be competitive. In comparison with the interest rate on the gold programme, the State Bank of India offers a rate of 5% to 6% on fixed cash deposits for a similar time frame.

Bullion Bulletin: What is ‘sound money’?

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The debate as to what constitutes ‘sound money’ is probably as old as money itself. The argument still rages today. It has been given a facelift thanks to the growth of Bitcoin and other cryptocurrencies. It has added significance in these times of high inflation, when the (apparently relentless) rise in prices erodes the value of the fiat currency in your pocket.

Thomas Jordan, chairman of the governing board of the Swiss National Bank (SNB), and thus in a supervisory position over what is widely held to be one of the soundest moneys around, the Swiss Franc, gave his opinion on what is sound money in October 2020.

Money, he said, is sound if its value is “stable. Only if this is the case will it be broadly accepted as a medium of exchange over the long term… Sound money… creates security and trust, which in turn promotes social harmony and cohesion… Money is therefore sound if it neither depreciates nor appreciates, i.e. if there is neither inflation nor deflation”.

Stability of value is the key characteristic of sound money. In the 17th and 18th centuries, clipping small amounts of precious metal from coins, or counterfeiting coins (both of which threatened that stability) were punishable by hanging (for men) and for women burning at the stake.

The loss of value of the Dollar since 1972 is 86%. The Pound Sterling has lost 94% of its value since 1972. These value losses are almost all entirely due to the impact of inflation. It’s fortunate for today’s central bankers that our society no longer hangs or burns at the stake those who by design make money worth less than it was. ‘By design’ is used deliberately – for even under ‘normal’ circumstances the US Federal Reserve, the European Central Bank, and the Bank of England all seek an inflation rate of 2% per year. 2% seems very little; but over two decades it means that your fiat money will lose more than 10% of its purchasing power.

This decline in purchasing power, and the possible failure of wages and/or investments to stay ahead of inflation, explains much of today’s current socio-economic turmoil, with strikes and protests springing up. It also explains the rise of cryptocurrencies, which are essentially an attempt to create an independent and inflation-proof money and/or investment asset.

For us at Glint, the only form of sound money has for centuries been gold. Glint’s clients can not only accumulate gold they can spend it too, digitally, instantly and securely. And for those clients more interested in gold as an investment asset, we have our Gold Portal for Wealth Managers, which can bring unprecedented liquidity to your managed portfolio, with instant access to physical allocated gold made liquid to spend as everyday money. It’s possible that on occasion you may need to liquidise some of your assets to release capital, which would involve selling positions that you may prefer to hold on to. With the Gold Portal from Glint, both you and your Wealth Manager will have instant access to real, allocated gold, without the need to sell in order to realise its liquidity, making your asset into real, everyday money whilst keeping all of the benefits of saving in gold.

Glint’s gold is of approved London Bullion Market Association (LBMA) good delivery standard and follows the World Gold Council’s principles for responsible gold mining. Its gold is sourced from Good Delivery List refiners who undergo stringent checks, meaning Glint does not face reputational risks associated with illegal gold mining, dirty gold mining and human rights issues. While gold itself isn’t regulated, Glint gold is regularly inspected by an independent auditor. Glint, of course, is regulated in the UK by the Financial Conduct Authority (FCA). Gold is not regulated by the FCA.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.