June Market Update

USA

In the US, The Bureau of Labor Statistics announced that the rate of unemployment fell to 4.3% in May which was suggested to be a 16-year low. However, while this was the case, it was also suggested that the pace of hiring had actually slowed. This meant in turn that the 138,000 new jobs which were added were below the 180,000 new jobs that economists were expecting. With unemployment low and jobs growth continuing, the Fed has clearly signalled that it wants to again raise rates twice more this year since raising rates in March. Following these announcements, gold prices rose to a near six-week high as investors turned to safe-haven gold.

Also in the USA, the dollar strengthened and gold saw losses as investors viewed the testimony from former US FBI director James Comey as containing no significant surprises. While Comey reported to the Senate Intelligence Committee that he believed President Donald Trump had instructed him to drop a Federal Bureau of Investigation into former national security adviser Michael Flynn, he did not make any major new revelations about alleged links between Trump or his associates and Russia.

UK Election

Following the surprise hung parliament result in the UK General Election, gold priced in sterling terms increased to a seven week high and rose by over 2% from £985 to over £1,007 an ounce. This boost was caused by uncertainty following the Conservative party’s failure to win a majority – a result which caused the pound to fall.

India

Gold demand in India has increased throughout June ahead of the new GST taxation policy which is expected to be introduced in early July. GST or ‘Goods and Services Tax’ is set to replace the array of complicated taxation which is currently seen in India with a simple nationwide scheme. This reform is said to be the biggest fiscal change since India’s liberalisation in the early 1990s.

It is suggested by the World Gold Council that while gold consumers will face a slightly higher tax rate, and the industry will go through a period of adjustment, the net impact on the gold industry is likely to be positive overall. This change should mean that the gold supply chain should become more transparent and efficient, and the tax reform could boost economic growth, which is expected to support overall gold demand.

The current taxation system in India is complex as each of India’s 29 states have their own specific sales tax rates. These are usually also levied on top of central government taxes which cause prices to increase for consumers. Additionally, in India, states usually treat goods arriving from neighbouring states as ‘imports’ and tax them accordingly. Frictions like these are said to hinder intra-India trade and are a barrier to economic growth. This new standard tax makes India a common market for the first time.

Due to the expected price increases, ahead of the July deadline, buyers in India have been quick to stock up on gold. This can be seen by the increase in gold imports as May saw a 236.7% increase compared to the same period last year. This was the fourth consecutive month where gold imports have more than doubled compared to the same month in the previous year. In one of the largest gold markets in the world – these are staggering figures.

Platinum

In June, Royal Mint Bullion further expanded the range of Platinum investment products with the introduction of a range of platinum bullion bars. The range includes 1 oz, 100g, 500g and kilo platinum bar options and adds to the existing platinum Queen’s Beasts Bullion coin range.

While many investors today are familiar with the investment merits of owning gold, far fewer are aware of the investment case for platinum, a precious metal 30 times rarer than gold. If you are new to investing in platinum, an article by Trevor Raymond of the World Platinum Investment Council for the SBMA recently outlines ‘Why you should consider investing in Platinum’. This is available here.