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Gold and Silver Price Review - July 2018

Author: Ian Davis - Bullion Manager

Published: 31 Jul 2018

Last Updated: 8 Feb 2019

Price Highs Gold @ £951.25 Silver @ £12.20

Price Lows -  Gold @ £930.77 Silver @ £11.74

 

Trade Wars - On July 6th America pressed forward with tariff increases aimed at China. They imposed $34 billion worth of tariffs on Chinese goods with Beijing immediately retaliating with the equivalent tariffs on American goods. The first round of tariffs covered Chinese products ranging from farming ploughs through to machine tools and communications satellites. So this, ladies and gentlemen, could be the beginning of a tit for tat trade war that could have far reaching global consequences. As shown on the Shanghai Composite above these tariffs could be playing a role in the ever-decreasing stock value. Phillip Hammond also stepped in to comment that a full blown trade war would be disastrous for the global economy and with so many countries on the knife edge any global shift could spell catastrophe. 

UK Politics - possibly less of global concern (we imagine) but still making headline news in the UK we have the resignation of Boris Johnson (Foreign Secretary) and David Davis (Secretary of State), making 6 front bench departures in the last 12 months for the PM. Both appalled by Theresa May's chequers proposals they left government giving sterling a quick punch down to a 3 week low but it did soon after recover to very little concern for longer term investors. Boris a "champion" of the Brexit squad appears to be filling in his application form for the PM's role for when the inevitable coup reveals itself. With 2 EU negotiators handing in resignations we only hope Dominic Raab takes the reigns and doesn't himself jump ship! Brexit itself appears to be generating more headlines than effects on the economy so far with the FTSE 250 showing good growth from March 2018 onwards. It remains to be seen what the prospect of "No Deal Brexit" or any Brexit at all will look like for the economy. The prospect of Boris running for PM and triggering a general election is making investors wary as this could eat into the Brexit departure timeline even further. Investors stepping back from UK assets generally equals a win for gold price with June showing a high of £951. Most likely this increase is being masked by the strength of the US dollar as we briefly discussed above. 

Trump - attempted to bestow advice onto Thersea May to sue the EU during his much protested visit of the UK! Just what she needs to say at the minute I imagine! On what grounds this legal case could be founded we are not sure and we are rather glad Theresa didn't heed his advice and kept the diplomatic gates open. Trump continues his Russian diplomatic mission meeting with President Putin and takes sides with Russia rather than his own intelligence services before a classic backtrack! He picks a fight with the Iranian president with threats that Iran will suffer if they threaten the US! This follows the departure of the US from the Iranian nuclear deal and sanctions being re-imposed on the country. To top off his month the FED comes under attack receiving scathing criticism from the President himself claiming interest rate hikes were damaging the economy. 

Russia - this month Russia decides to dump US debt! Russia dumped 84% of  its US treasury bonds ....... but what exactly does this mean? Well firstly the trigger may have come in April when the US imposed sanctions on the aluminium manufacture Rusal. The dumping of debt could therefore have been a retaliation but much more likely to be a safeguard against further sanctions. It has long been a worry that an important creditor to the US who dumps significant US bonds could damage the American economy. Was this weaponized foreign exchange holdings? Perhaps it was. The value of treasury bonds recovered quickly and it is thought that a debt dumped by an even larger creditor such as China (who is in fact the biggest holding $1.2 dollars) could cause much more of a problem. Russia was only ranked 15th with a total holding of $105.7 billion. The ongoing geo-political tensions is surely affecting the economies of both countries and the global economy at large. It's very hard to tie gold price into these political events but the more tension and uncertainty in the world precious metals tend to increase in value. 

You may wish to read more articles in our market news section. 

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