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March 2016 Review

Fear of fiscal crisis a ‘top concern’ across the world

In a study by the World Economic Forum of the top concerns which could affect business in the next decade, ‘fiscal crisis’ was reportedly stated as one of the ‘top five concerns’ across eight global regions including East Asia, North America and Europe. One of the other cited ‘top concerns’ to business was underemployment and potentially eroding skill sets that businesses predict they will require in the future.

In contrast to this, only two overall regions, North America and East Asia & the Pacific saw ‘cyberattack’ as one of the top risks to doing business and only Europe and Central Asia & Russia suggested that ‘failure of financial mechanism or institution’ was a ‘top risk’. You can see the results from this report on the World Economic Forum website here.

Germany to bring half its gold back by 2020

After decades of storing the majority of its gold reserves overseas, Germany made the decision to speed up efforts to bring its bullion back home, announcing in March that it plans to repatriate at least half of the country’s gold by 2020. It was reported by that according to the Bundesbank, the country’s central bank, there currently are about 1,400 tons or 41.5% of Germany’s gold reserves sitting at its vaults in Frankfurt.

During the Cold War the Bundesbank wanted to keep its gold in the west in case of an invasion from the Soviet Union, but since 2013, it has been repatriating its gold bars. So far it has brought around 366 tonnes of gold back to Frankfurt, roughly half of the total to be transferred. Bundesbank plans to bring another 307 tons of the precious metal home in the next five years. That means slightly more than half of Germany’s gold will be stored within the country by 2020, about a third at the Federal Reserve and the remaining 13% at the Bank of England.

Gold prices under pressure due to fall in Indian demand

Due to the unexpected sales tax which was levied on gold by the Indian government in February, Jewellers in India took to the streets in protest in early March and launched a strike in reaction to the new taxation level. As a result of this action, gold sales in the region were reportedly ‘at a standstill’ in early March, with reports from some Indian refineries suggesting that there was “no buying anywhere across the nation”. In a similar exercise in 2012, when the government in India increased excise duty, a 21 day strike by jewellers in the country forced the government to reverse the decision.

Is gold heading for biggest quarterly gain in nearly 30 years?

Towards the end of March, it was suggested by that gold was heading for its biggest quarterly gain in nearly 30 years prompted by a drop in equities which boosted the appeal of gold as an alternative asset. Concerns that the US Federal Reserve would increase interest rates receded, and the increase of 16% in the first three months of 2016 (gold’s biggest quarterly rise since 1986) was reported to be caused by a combination of “safe-haven demand on the back of worries about China in particular”.

UAE tackles Sovereign counterfeiters

In a country which has something of a poor reputation regarding enforcing the fight against counterfeit luxury goods, on March 1st 2016, a ‘trade circular’ was released by the ‘Dubai Gold & Jewellery Group’ alerting trade members of the availability and associated penalties surrounding so called ‘copy Sovereigns’. The trade body alerted members of a penalty of AED 30,000 (around £6000) for those who were found to be selling counterfeit Sovereign coins and ‘mystery shoppers’ would be used to help track down infringing merchants across the region.

Negative yields and gold demand

German reinsurer Munich Re is boosting its gold and cash reserves in the face of the punishing negative interest rates from the European Central Bank, it said on Wednesday.

The world’s largest reinsurer is far from alone in seeking alternative investment strategies to counter the near-zero or negative interest rates that reduce the income insurers require to pay out on policies. Munich Re has held gold in its coffers for some time and recently added a cash sum in in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.

“We are just trying it out, but you can see how serious the situation is,” von Bomhard said.

The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank. ECB policy has caused financial market interest rates to fall, reducing the return that insurance companies can earn from investments in bonds, hurting profit and raising concerns about their ability to meet future promises to policyholders.

The Royal Mint launches a new Bullion range

At the end of March 2016, The Royal Mint launched a new ‘Queen’s Beasts’ range of bullion on the Royal Mint Bullion website. As well as introducing a new range of striking designs to the bullion portfolio, The Queen’s Beasts range also provides a new option for silver investors. A new two-ounce silver bullion coin, struck to 999.9 fineness, is now offered, alongside 1 oz and ¼ oz gold versions – the first time an official two-ounce United Kingdom silver bullion coin has been struck. 

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