Weekly update - Solid gold

This week’s update is written by Matt Girard in our precious metals team.

When looking back at 2022, although precious metals didn’t sustain record highs and there was a lot of negative sentiment due to the strength of the US dollar, it is worth recognising their resilience in what was a very testing year.

Gold has sparked into life over the last few months with prices up $300 per troy ounce (15%) since early November1. Following the March highs of over $2,000 an ounce, gold had been on a steady decline through the remainder of the year before rallying over the Christmas period and into 20231. This meant that despite some strong headwinds for metals, both gold and silver finished the year stronger than they started1.

Central banks were a major contributor to the gold price during the year as there were net purchases in nine out of 11 months. Rumours had been circling of a large “mystery buyer” with speculation suggesting this could be China. This did, in fact, turn out to be true, but as their last reported increase was in September 2019, it came as quite a surprise when the People’s Bank of China reported an increase of 32 tonnes to its gold reserves in November1. The central bank of Turkey added a further 19 tonnes1, establishing itself as the biggest net purchaser of 2022 (pending any significant December data).

Further support was gained thanks to strong retail investment. This is thought to be the result of recession fears and continued geopolitical turbulence. The Royal Mint have confirmed their gold bullion sales increased 25% in 2022 and silver was also up 29%2. Sales look to continue as they have recently unveiled the new 2023 Britannia bearing King Charles III’s portrait. The Britannia has been one of the best-selling coins in the UK alongside the Sovereign and is growing internationally with sales in both the US and Germany considerably higher during 2022 than previous years. The coin holds some unique advantages, particularly if you are a UK tax resident; due to their legal tender status, they are exempt from Capital Gains Tax and although you often pay a premium on purchase, it may be worth considering given the potential savings on sale.

Although last year proved to be fruitful for many companies in the metals market, there is one business who won’t look back on gold so fondly. Co-founder and chief executive of Brewdog, James Watt, has said that a misleading promotion released by the brewer in October 2021 has ended up costing him “around £470,000”3. The Scottish Brewing company offered customers the chance of winning a ‘Solid Gold’ beer can, which would be hidden amongst cases bought from their online store. When the winning cans were found, it was quickly discovered that they were in fact gold-plated as opposed to solid gold. After some investigation, it’s estimated that just a single 330ml can made with pure gold would have cost £363,000.

We hope you have a good week.

Sources:

Understanding Investment Discretionary Investment Management Advisory Investment Service Precious Metals Group News Cash Management Investment Insights ESG/Responsible Investing Corporate Finance Bailiwick Investments Ravenscroft Group Understanding investing films Podcast All News & Insights