The gold price has been soaring in most paper money terms recently. In pounds sterling, it came close to its record since 1970 of £1,124.23 per troy ounce, set on 28 February 2012. Gold has set a new record high in Australian dollars, too – above A$2,000.
Why these new highs?
Uncertainty stalks the world, that’s why.
For one thing, the US Federal Reserve hit the uncertainties button on 19 June. Slowing economic growth, rising trade tensions, inflation stuck at below its 2% target, were all on the lips of Jay Powell, Chairman of the Reserve, as he readied the market for a cut in US interest rates in 2020.
The US is moving from its “solid” rate of growth anticipated by the Fed in May, to a “moderate” pace, It’s well known that President Donald Trump, anxious for his re-election success, is pressing the Federal Reserve to cut interest rates.
Before the Fed made known its latest macroeconomic view, the president of the European Central Bank, Mario Draghi, – i.e. printing paper – in order to try to get the European Union’s economy moving faster than a very tired snail.
The fact that these two major economic areas are nudging close towards stagflation – stagnation combined with badly disguised inflation – was enough to jolt the US dollar gold price higher.
And for the gold price to rise so significantly in pound sterling, the uncertainties are considerable.
The United Kingdom is now less than a month away from having yet another Prime Minister, who will have the job of dealing with the vote to leave the European Union. It has been more than three years since the UK referendum on EU membership – and these three years have been wasted, whether you are a Leaver or Remainer. “I’m exasperated. I’ve had enough,” said John Griffin, one of the biggest donors to the Conservative Party and the founder of Addison Lee, the London-based private taxi company, in . Griffin – who voted to remain in the EU but has reconciled himself to the vote to leave – expressed his annoyance at Boris Johnson, the favourite to become the next leader of the party, and therefore Prime Minister. Johnson has said that the UK will leave the EU by 31 October, the final date agreed between the UK and the EU.
There’s no doubt that Johnson has great charisma, and that he can fill a hall with supporters. He has wit, charm, and great good humour. But he is a deeply divisive character with a murky past. His well-publicised quarrel with his girlfriend – and his refusal to answer media questions about it – is just the latest episode which raises doubts his personal stability, doubts that influential supporters of the Conservative Party like Griffin are now openly expressing. Nevertheless he seems to retain more support from the grassroots of the Party than does Jeremy Hunt, the only other contender still in the race.
From black cabs to the gold price might seem a long way, but the two are closer than you think. Griffin’s obvious annoyance at there being no clear, obvious, universally popular candidate for the UK’s next Prime Minister speaks noisy volumes about the current uncertainty in the UK.
No wonder gold is so high in sterling terms.
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