An unstoppable force

Another week, another record gold price, above $2,685/ounce, making the gain since the start of this year 30%, or more than 35% over the last 12 months, a staggering rise for something once derided as a 'barbarous relic'. At the start of this year 25 gold 'experts' were asked by the London Bullion Market Association (LBMA) were asked to forecast the gold price for 2024. The average of all 25 was for gold to reach $2059/ounce, 6.1% higher than 2023. Even the most bullish still undershot the actual price by more than $200/ounce. What does this show? Never trust 'experts'? Delegates at the LBMA event held this week in Miami concluded that a year from now the price will have reached $2917.40/ounce, around 10% higher than current levels. 'Rising global uncertainty' is the explanation often trotted out for the price rise, but that needs a tighter definition. If it's taken to mean political disarray, we have to disagree. All recent geopolitical violence, ranging from Ukraine to Lebanon, have had very little influence over the gold price. Far more important is what central banks - in particular the US Federal Reserve - get up to when it comes to the tightness and/or looseness of the money supply. This is not simply a matter of pushing up or reducing interest rates, but of creating new fiat money, using printing presses or accountancy chicanery to convince the public it's richer than it thought.

Who's in charge?

With less than three weeks to go before the US Presidential election all media is in overdrive, speculating about who might win, how close-run it will be, and what the consequences might be. In truth, this is all froth - no one has any real answers. All that can be said is that with the US so utterly divided, and without any real obvious 'winner', the days after 5 November may well turn ugly. This newsletter is rigorously apolitical - what matters to us is the outlook for gold. With that in mind, it really doesn't matter much who is going to be in charge. Donald Trump is notoriously unpredictable, Kamala Harris is more predictable. But neither of them have a clue about how to curtail federal spending, or how to reduce the enormous national debt. It's not even clear that either of them will be able to help voters still struggling with the aftermath of the recent inflation spurt. The headline inflation rate in the US may have fallen in September to 2.4%, but food prices are still about a third higher than in 2020, as they are in the UK. The Dollar has continued to lose purchasing power and will no doubt carry on losing it whoever is the next President.

The UK Budget

Speculation is also rife in the UK, this time about what the new Labour government plans for its first Budget, due on 30 October. The government has shifted from claiming they inherited a £22 billion ($28.59 billion) fiscal 'black hole' to suggesting it's actually £40 billion ($52 billion). Many people are nervous that taxes will rise; Prime Minister Keir Starmer has said that those with the "broadest shoulders should bear the heavier burden". It's not clear that this government is any more bothered about debt than that of the US, yet with global debt about $315 trillion (£242 trillion) the costs of this debt pose considerable risk. It's estimated that 2025/26 will be dominated by refinancing issues for much of this debt; around $50 trillion (£38 trillion) must be rolled over - refinanced - on average each year. Reducing debt with ageing populations insisting on ever larger welfare outlays is a tall, perhaps impossible, order. This looming problem is one important reason why investors are taking greater note of the 'barbarous relic's' merits than for some years. And it's a strong reason to believe that gold has higher to go.

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.