LAWRIE WILLIAMS: Golden deliberations
With both the U.S. and Canadian markets closed for their respective Labo(u)r Day public holidays at the past weekend It has been Asian and European markets which set the tone for any price action in the precious metals markets at the beginning of the most recent week. Not surprisingly markets were thin then and probably not too much should be read into the price movements in gold and silver such as they were because, in reality the global price setting tune these days is mostly set by activity in the U.S. futures markets anyway.
Precious metals prices since the weekend have mostly been weaker with gold, as I write, down around $30, despite something of a mild recovery from its midweek lows and silver down around 40 cents in response to the stronger US dollar. Both gold and silver have been fairly volatile of late. Gold had moved up quite sharply on Friday following some predictably weak U.S. nonfarm labour employment figures after some equally weak private sector data a couple of days earlier. Silver, after a torrid few days, also made a decent recovery Thursday and Friday, but has come back a little in price since and still remains at just over $24 an ounce after reaching over $28 as recently as May.
It may have been a holiday in the U.S. and Canada, but it felt like one here in the UK too with the return of some decently warm weather – particularly welcome now that Summer is officially over. We took advantage of the fine weather in hosting our Golden Wedding anniversary party in our garden – a gathering made doubly welcome by the easing of COVID-19 restrictions here enabling such an event to take place at all.
The UK government in its wisdom has, of late, been following a course of a trade-off between a return to something near normality. This has been in an attempt to revitalize the economy in the face of an increased risk of rising COVID infections and deaths. hopefully mitigated in the light of our high vaccine take-up.
Our party in the garden makes one speculate on the term ‘Golden’ to signify such a special event and serves to emphasise the place of gold, in particular, as a key constituent in our psyche. Gold, as an item of wealth to be desired, features strongly in many forms of historic literature, and in many European languages too as synonymous with money, and is built even more into the wealth preservation agendas of most other cultures around the world, notably in South and East Asia and the Middle East. This all helps it account for its longevity as a safe haven asset for wealth protection in virtually all nations across all continents.
It is in part because of this built-in place of gold in our collective consciousness that the yellow metal will always remain on our investment horizons despite the ups and downs in our various economies. It has its place in our minds as being a metal of ever-continuing value no matter the ups and downs of the fiat currencies which have replaced it as a trading counter over the years. The purchasing power of fiat currencies can rise and fall (mostly inevitably fall in the long term) and even fail altogether, while gold represents something of an ongoing constant in the monetary universe.
Gold is arguably seen as a hedge against inflation – an important attribute as we begin to exit from pandemic-related restrictions – if we do. It is also seen as a wealth protecting, relatively easily portable, safe haven asset in times of political and economic turmoil. That, at least in part, is why we believe strongly in the continuing advance of the gold price going forwards. It may not rise in a straight line and it will continue to see setbacks in its progress to higher levels, but will undoubtedly continue to move upwards in the years ahead as the purchasing power of our fiat currencies continues to deteriorate.