Category: Glint’s Helpful HInts

People naturally want to know how well their gold holdings compare to others, whether those are fiat currencies (such as the Dollar), house prices, or other commodities, such as copper.

The copper price is often regarded as an accurate barometer of the stages of global economic growth; a guide to trends. The stronger the economic outlook, the greater is the demand for copper. It’s a key industrial metal, with more than 65% of it going into building construction and electronics. With the shift away from the internal combustion engine (ICE) to electric vehicles (EVs) the demand for copper should rise considerably. Conventional ICE vehicles contain 18-49 pounds of copper, hybrid electric vehicles (HEV) contain approximately 85 pounds, plug-in hybrid electric vehicles (PHEV) use 132 pounds, and battery electric vehicles (BEVs) contain 183 pounds. The copper/gold ratio is therefore a supportive guide to what’s happening in the world economy.

The copper/gold ratio is calculated by dividing the market price of an ounce of copper by the market price of an ounce of gold. The two over many years have been highly correlated – they have a strong relationship. During times of economic and geopolitical distress gold generally tends to perform well, because it is essentially a leading indicator of fear. Copper is the exact opposite. Because it is a key industrial metal that is used globally in a wide range of industrial applications, it performs strongly when the global economy is firing on all cylinders.

A declining copper/gold ratio shows a weakening economy, while a rising ratio shows a strengthening economy. A decline in the ratio (i.e. low copper prices relative to gold) is a leading indicator of a less inflationary environment, while an increase in the ratio suggests a higher inflationary environment.

What is the copper-to-gold ratio now telling us? In periods of accelerating economic activity, an industrial commodity like copper will rise in price against gold. Copper this week has fallen to a fresh 52-week low, below $4/pound. The relative strength of copper versus gold has fallen by 15% since the beginning of June and is now trading at the lowest level since February 2021. For some, this implies we are headed for a slowing economy. The copper/gold ratio may also be signalling that the US Federal Reserve, which currently is embarked on a round of interest rate rises, may find that trajectory more difficult as the economy slows. And while the gold price remains relatively elevated, the ratio may even by implying that stagflation is close.

A UK-based client has asked ‘why do the price charts between different currencies vary so much on the Glint app? After all, the gold price is standard, right?’

Wrong, I’m afraid. The gold price can be measured against many things – oil, wheat, houses – but the most common measurement is the US Dollar. Why the US Dollar? That’s because the Dollar is currently regarded as the international fiat reserve currency, and the value of other fiat currencies is consequently measured against the US Dollar.

Currently outside of the US, on the Glint app it’s possible to read gold price charts in three currencies – the US Dollar, the British Pound, and the European Union’s Euro. Since the end of the Bretton Woods system of fixed exchange rates in early 1973, major fiat currencies have ‘floated’ against one another. Members of the International Monetary Fund (IMF) became free to choose any form of exchange arrangement they wish (except pegging their currency to gold): allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union.

Because fiat currencies have no fixed reference point (such as gold) they move, sometimes sharply, in value against all other currencies. All manner of events can shift a currency’s value – the election of a leftist President in Colombia, whose manifesto promised bigger state spending on 21 June knocked 5% off the Colombian Peso against the US Dollar, the biggest fall since late 2008.

On 13 June, the British Pound fell in value against the US Dollar by 1.5% on a slew of disappointing data about the British economy. Even though inflation in the US is running at 40-year highs, the US Dollar is up against a basket of other fiat currencies by some 9% so far this year and is at its highest since 2002. The Dollar’s strength is largely because in times of uncertainty it is seen as a relatively safe haven.

So when you check the price charts on the Glint app, you need to make an allowance for the strength/weakness of the fiat currency by which you measure the price of your gold.

Cryptocurrencies have had a rough few days. The start of the rout coincided with the latest US inflation figure – a 40-year high of 8.6% – and a sense that the US Federal Reserve must do something.

That something has started – higher interest rates and quantitative tightening, i.e. shrinking money supply by no longer buying assets but instead selling them, the assets being US bonds.

The Fed has bought more than $4.5 trillion of government and mortgage-backed bonds since March 2020 and it is starting to sell them at $95 billion a month.

By buying these bonds it pulls them off the market, which means financial markets have to find other assets, pushing up the value of those other assets.

Among the other assets that have benefited are cryptocurrencies, but they are shivering in what’s become known as a ‘crypto winter’. The biggest US crypto exchange, Coinbase, is making 18% of its workers redundant; Coinbase’s share price has plunged by some 80% since it floated more than a year ago.

The value of Bitcoin, the dominant cryptocurrency, has fallen by 47% since the start of 2022, after growing by 292% in 2020 and 59% in 2021. Gold however is slightly up on the start of the year; £1,000 put into gold at the start of 2022 was worth £1,091.42 by 10 June. The same £1,000 put into Bitcoin would by that date have been worth £669.01.

Gold and cryptocurrencies share a common cause; the desire to develop and see used an alternative mechanism of exchange – an alternative money – to fiat currencies, the value of which is steadily eroded over time by inflation.

But there is at least one crucial difference between the two, and that’s how they are correlated to other assets.

Gold’s correlation with the S&P 500 over the past 45 years averages zero. Which is one reason why gold has often been seen as an appropriate place to be when all else is going down the tubes. Bitcoin’s correlation with the S&P 500 for most of 2021 was between minus 0.2 to 0.2, meaning that the two were largely uncorrelated.

But that has changed – the 90-day correlation between Bitcoin and the S&P 500 has moved from 0.2 (no significant correlation) to just about 0.6 (fairly strong correlation). When stocks move, up or down, Bitcoin now tends to follow suit.

Maybe this high correlation between Bitcoin and the S&P 500 will weaken. Maybe it will get stronger. Michael Saylor, CEO of MicroStrategy, the publicly-traded US company which owns a lot of Bitcoins, was hyperbolically confident recently when he said: “Bitcoin is the most certain thing in a very uncertain world, it’s more certain than the other 19,000 cryptocurrencies, it’s more certain than any stock, it’s more certain than owning property anywhere in the world”.

For us, gold is security, Glint its key. There are not 19,000 other ‘golds’ competing for attention. As the US Federal Reserve tries to halt an era of cheap money, all kinds of apple carts may be upset.

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.

Economists often resort to metaphors in their analyses. Discussion about whether we are in for a ‘soft’ or ‘hard’ landing is a good example of this.

Soft and hard landings originally refer to an air or space craft landing – is it bumpy or smooth? Obviously the preference is for a smooth landing. The terms have been adopted by economics/business/finance to describe how an economy might slow, or land, or revert to some stasis. Will it ‘land’ with a thump or more gently? Here too the preference is for a smooth landing.

The terms are closely linked the level of inflation. If inflation is higher than desired, an economy is said to be ‘overheating’ (another metaphor).

Economics is as much an art as a science – there is no ‘right’ figure for inflation for example. At Glint we have mixed feelings about inflation: inflation by definition erodes the purchasing power of fiat currency but equally that erosion can be an incentive for people to seek alternatives to fiat currency, such as gold.

At 8.3% annually in the US, 9% in the UK, 7.8% in the European Union (EU) – and 15.6% in Lithuania – inflation is relatively high, the highest in four decades in some of these markets. We can debate why inflation is racing but for the time being the question is what central banks/governments might do to try to bring inflation down to levels they regard as more tolerable, which is around 2%/year. The conventional measure for reducing inflation is to push up interest rates but if this is done too aggressively then the risk is that the economy overall (employment, productivity especially) comes to a juddering halt – it lands in a hard fashion. But doing nothing against inflation this high is not an option for central banks – they are nervous that it might spin out of control.

Central banks are therefore looking for a ‘Goldilocks’ answer (yet another metaphor) – reducing inflation without creating greater levels of unemployment, or cutting productivity; neither too hot nor too cold. Most are pushing up interest rates slowly, gently, a little at a time. Only Turkey seems to think that cutting interest rates can combat inflation – and Turkey now has inflation above 70% a year.

What’s the right answer- what is most likely to result in a ‘soft’ landing? This is economics – there are as many answers as there are metaphors. Only time will tell.

It’s June, it’s the start of a four-day holiday in Britain to celebrate Queen Elizabeth’s 70 years on the throne, and Covid-19 restrictions are rapidly becoming an unhappy memory. People everywhere are thinking about getting out their passport and suntan lotion and jetting off to exotic places!

Speaking of exotic, Sunday sees an airing for the gold state coach at the finale of the Queen Elizabeth’s pageant celebrations in London. The coach is reserved solely for the sovereign; she used it in 1953 when she was crowned. Because of its age (built in 1760) and weight, it only moves at a walking pace. And the Queen herself (now 96) won’t be on board on Sunday.

But now that travel is once again becoming easier, you are bound to be on board sooner or later! We have a piece of important travel advice. Think of your Glint App or card as you would your passport – it’s that vital.

Whether you are travelling in the US or Europe, spending in gold makes sense, it’s free for all purchases in your own country, from Jubilee bunting to bottles of bubbly! – And if you want to spend in local currency when travelling abroad, with Glint foreign exchange fees are just 0.5%, against high street bank charges in the UK of about 2% and foreign transaction fees in the US as high as 3%. Glint is up to six times less expensive than the banks! Happy holidays!

When an individual can’t pay their debts they are said to be ‘in default’. When a country can’t pay its debts, this default is called a ‘sovereign debt default’. It is surprisingly common for countries to be unable to repay their creditors; since 1960, 147 governments have defaulted, “well over half the current universe of 214 sovereigns” according to a joint Bank of England (BoE) & Bank of Canada (BoC) study published in 2020. Sri Lanka has just joined the defaulters’ list, having missed interest payments on two $1.25 billion sovereign bonds. Sri Lanka’s total foreign debt is estimated to be more than $50 billion. It’s the first country in the Asia-Pacific region to have defaulted in more than 20 years, but, as this chart (prepared before Sir Lanka actually defaulted) shows, it may not be the last. The BoE/BoC study says that “defaults will pick up again… many advanced and emerging-market economies countries are facing growing public debt burdens”.

Of course, the Covid-19 fallout – including a drop in tourist travel – is blamed, but so too is the war in Ukraine, which has pushed up the price of imported energy, on which Sri Lanka depends. Accusations of mismanagement and corruption have also been levelled at government figures. Debt for countries, like that for individuals, is not necessarily bad – individuals take on mortgages to secure a home and countries borrow in order to develop and grow. But the debts need to be sustainable – countries, like individuals, need to borrow only as much as they can repay.

Sri Lanka has now turned to the international funder of last resort, the International Monetary Fund (IMF) and asked for a bailout of as much as $4 billion. The country’s annual inflation is 30% and heading higher, there are shortages of food, medicine, and fuel, and the currency has almost halved in value since it was floated in March. Negotiations with the IMF are likely to take months and, because the Fund imposes “conditionality” on its loans, public suffering could well get worse before it improves.

We’ve all done it – forgotten our password. With so many passwords flying around it’s a challenge to remember them all.

But if you forget your Glint password, resetting it could not be simpler. Just follow these steps:

1. From the Glint welcome screen, click on Log In button.

2. Click on the ‘Forgot Password?’ link.

3. Enter your registered Glint email.

4. Receive a temporary 6-digit code on your email (takes about 2-10 minutes to deliver) and enter it at this screen.

5. Enter and confirm new password.

6. Password has been changed.

7. Go to Log In screen and log in with your email and password.

And if in doubt our friendly client support team is there to help in your region.

Warnings of an imminent recession in the UK – and perhaps the US – are coming thick and fast.

In the UK, the National Institute of Economic and Social Research (NIESR) has forecast that gross domestic product (GDP) will fall by 0.2% in the third quarter and 0.4% in the fourth quarter of this year. Two consecutive quarters of contraction is a commonly used definition of recession. The NIESR thinks that up to one million people in Britain could be living in ‘destitution’ over the next 12 months. In the US, both Main Street and Wall Street fear that a recession is on the cards.

The chairman of Tesco, the UK supermarket giant, has warned of there being “real food poverty for the first time in a generation” in the UK. The Trussell Trust, a UK charity that runs food banks, says that during April 2021-March 2022 it distributed 14% more emergency food parcels than in the same period of 2019/20, at the height of the Covid-19 pandemic. In the US, currently 12% of the population are struggling to afford sufficient food.

For most people recessions have little to do with GDP figures – they are rather times when unemployment grows, wages fall behind inflation, and there’s a downturn in investments.

When recessions loom then batten down the hatches against the financial tornado. Make a financial plan; try to live more thriftily; try to accumulate a few months’ financial ‘cushion’; avoid taking on unnecessary debt; if you have spare wealth, invest it in something that is likely to keep its purchasing power and provides immediate liquidity – such as gold with Glint.

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.

‘Buying the dip’ is a traders’ catchphrase which refers to buying an asset when it has dropped in price, in the belief/hope that it will soon rise again, and a profit can result.

As a trading strategy, it requires nerves of steel and ideally a crystal ball – who knows if the ‘dip’ in value may not have further to go? It’s an attempt to time the movement in markets, and that can be a very risky business.

In the Great Depression, the US stock market boomed and broke in 1929-32, losing 89.2% of its value from its peak on3 September 1929 to its trough on 8 July 1932. On ‘Black Thursday’ – 24 October 1929 – the US stock market opened 11% lower than the previous day’s close. Investors sensed this was a classic ‘dip’ and a perfect buying opportunity, and some bought stocks.

But it was a false dawn – not so much a ‘dip’ as a long-term immersion – on the following Monday the Dow Jones Industrial Average (DJIA) closed down 13%, and the day after it closed 12% lower. The DJIA did not recover its previous peak (of 381.17) until November 1954. On Wednesday week the DJIA closed almost 3% higher, at more than 34,000.

In this week’s Treasury, Jason Cozens, our founder and CEO, gives the raison d’etre for Glint in his interview with GB News. He simply says: “Gold is money, and we’ve made it everyday money for everybody out there”.

It’s not that gold is the only money. But Glint has made gold ‘everyday’ money for ‘everybody’.

Fiat currencies, government-licensed legal tender, the often pretty paper we carry around and use to buy our groceries with, are universally accepted as money.

Gold has been used as money – as a means of exchange for goods and services – for 5,000 years. Today we are living through an experiment in which, as previously, fiat currencies that are non-convertible into tangible assets dominate the planet. Historically, these experiments with non-convertible paper currencies last an average of 27 years.

The new kid on the block is of course cryptocurrency, or it may be more accurate to call the 18,000 (and rising) cryptocurrencies ‘contenders’ for the position of money.

Yet fiat money and cryptocurrency both have their drawbacks. Fiat money can be created at will by governments who need to placate their voters, as demonstrated during the recent Covid health crisis. The more paper that’s created the less it’s worth. The Dollar’s purchasing power has fallen 80% since 1970.

With cryptocurrencies, there is obviously still a fierce competition going on to become top dog, to stake a claim to be a universally accepted currency. Bitcoin may become that, but as yet it’s legal tender only in El Salvador and (soon) the Central African Republic.

Gold cannot be created by governments or computers. With Glint, gold is once again money, e-money (digitised) to be sure, but then 96% of money in the UK is held electronically. Gold is security. 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.

Click here to watch Jason Cozens (Glint CEO), being interviewed on GB News by Liam Halligan for ‘On The Money’