The Daily Nugget – Brits screwed by inflation should invest in gold
This has been an excellent week, not only for the gold price which is set to make a weekly gain but also for The Real Asset Company where we have seen increasing interest in our Singapore vault since its launch last week.
The big news this week has, of course, been central banks are continuing to buy gold. This has now prompted much speculation in the gold world of where prices could be headed, should this 3-year old trend continue.
Once again we end another week with things looking increasingly friendly for gold investment. Inflation in the UK is outstripping earnings, the EU is back and forth on various agreements, deals, recoveries and crises, the US is still approaching the growing ‘cliff’ at speed and elsewhere stands by and stocks up on gold.
Gold price boosted by Greek developments
Rumours of a Greek deal have strengthened the Euro against the dollar, helping the gold price which has also been jollied on by US fiscal concerns.
Whilst a Greek deal seems to be getting closer, things elsewhere in the Eurozone region continue to look glum. Services activity was reported to have dropped in the single currency area according to Markit’s PMI. A score of 45.7, well below the benchmark of 50, indicates no change from the previous month and serious contraction. Whilst Germany saw some improvement in their manufacturing activity, services fell to a 41-month low. The data was so poor many now expect to see the Euro area slip into a deeper recession for the fourth-quarter.
China has once again shown everyone how it’s done this week. After a poor performance in recent months, the manufacturing sector hit a 13-month high in output. This positive data saw mining stocks pick up, cheered on by the prospect of stronger demand in the future for commodities.
Western frustrations
Here in the UK, business leaders yesterday predicted a 3-month downturn for manufacturing. In a CBI survey saw the lowest prediction for orders in the sector this year. Many are blaming this on the Eurozone crisis and the resulting drop in orders, we refer you to an earlier Daily Nugget where we pointed out our future reliance on the single currency union and the problems that would come from this.
Data from the Office of National Statistics shows inflation has outstripped earnings for the past 12 years. This adds to my frustrations that no one in the West is asking why governments and central banks encourage inflation when wages are not keeping up with it. Or even, why is inflation anywhere encouraged?
The WGC and Reliance Capital have set up a gold accumulation plan in India to encourage saving into gold. This is something we are also seeing in China (as I discussed on yesterday’s Keiser Report). Both countries have high government spending, but are at least reinvesting the wealth into gold. Here in the UK, government spending remains high but the trickle down of wealth has slowed dramatically, it’s time for Brits to start their own gold investment and accumulation plans of their own.
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