Gold News

UK Gold Price Below £1500 as ETFs Shrink, 'Record' Pay Growth Leaves Real Wages at 2005 Level

DESPITE the latest outflows from gold-backed ETF trusts funds, the gold price hit a 3-week high for Dollar investors on Tuesday but it held flat in Euros and fell near new 2023 lows for British investors as new UK wage data saw expectations for Western central bank interest rates diverge once again.
With tomorrow's US consumer-price data forecast to show a sharp drop to 3.1% annual inflation – the slowest in 2 years – the Dollar dropped to a 3-month low on the FX market and Washington's borrowing costs retreated below 4.0% on 10-year Treasurys, down 0.25 points from last fall's peak.
Ten-year UK Gilt yields in contrast rose near 4.65% per annum, the highest since 2008, after average wages in the world's 6th largest economy showed record yet still below inflation growth.
With the Pound jumping to 15-month highs on the FX market, the UK gold price in Pounds per ounce today dipped below £1500 for the 4th time in the last fortnight, a level first seen at the peak of gold's first-wave Covid Crisis surge in summer 2020 and last seen at end-February this year, just before the precious metal leapt 10.8% to new all-time gold highs amid the US and then Swiss banking turmoil.
Gold priced in the Euro meantime showed a small gain for the week so far at €1759 while the Dollar gold price touched $1938 per Troy ounce.  
Chart of global gold-backed ETF holdings in tonnes. Source: BullionVault
The 5 largest UK-listed gold ETFs last month shrank 3.1% in size as shareholders cut their exposure to the precious metal's price.
That outpaced the wider 1.7% liquidation of European-listed gold-backed products and the 1.5% outflows from North American trust funds.
Year-to-date worldwide, gold-backed ETFs shrank 1.9% in size between New Year and last Friday, data compiled by the mining industry's World Gold Council says, falling to the smallest since April 2020 but holding unchanged in size yesterday.
"[We'll do] what is necessary for as long as necessary to tackle inflation," said UK finance minister Jeremy Hunt last night in his annual Chancellor's speech at Mansion House in the City of London.
'Joining forced' as newspaper editors put it with UK Bank of England boss Andrew Bailey who also spoke at the event, "That means taking responsible decisions on public finances," Hunt went on, "including public sector pay, because more borrowing is itself inflationary."
But the government "must stop scapegoating workers for its failures," says TUC trades unions' boss Paul Nowak.
"Wages are not driving inflation – they are not even keeping up with it."
Basic UK pay, excluding bonuses, rose 7.3% per year on average in May, the ONS says, the fastest overall pace on its current data series thanks to public-sector pay awards rising towards the pace already seen in the private sector.
But that's still below the 7.9% annual rise in the cost of living reported on the ONS's lowest measure of inflation – the 'harmonized' Consumer Price Index – and it leaves total pay unchanged in real terms since autumn 2005, down by 6.5% from the peak of New Year 2008
"In the context of the last 20 years, UK equities and credit are the cheapest global asset classes we can find," says a Morgan Stanley note published Monday morning.
Tracking current prices against their peak of the last 20 years, Morgan's table puts gold at the top, with US equities close behind.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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