An integral part of life as a numismatist is to research and view important coin collections from around the world. This is probably as important as setting up one’s own collection. This year, numismatists from around the world will be flocking to Philadelphia to attend the World’s Fair of Money, an important global event organised by the American Numismatic Association (ANA).
What is the event all about?
The event is a 5-day exposition which will be held from 14th to 18th August 2018 at the Pennsylvania Convention Centre, located in Philadelphia. Based in downtown Philadelphia, the centre is strategically located for all visitors and has convenient transport links from all over. The convention centre boasts of a million square feet of space available for meetings, exhibitions, etc. It also has the largest ballroom in the northeastern part of the US. The fair will be held in halls D and E, which are located at 1101 Arch Street. The event will not only showcase rare coins and currency bank notes but also stamps, postcards and other items of antique and philatelic importance.
If you are a keen numismatist and are interested in attending this event, you can register for the fair here, by clicking on this link. The fair is open to visitors from 1 pm on 14th August. From the following day till 18th August, the show will open at 10 am. The event will close at 6 pm on all days, barring the last, when it will close at 4 pm. Members of the ANA will enjoy free entry and special entry timings that allow them to enter the event half an hour earlier than the general public. The admission price is $8 per adult non-member, with the exception of Saturday. Kids below 12 go free to the event on all days. Admission to the event will close every day at 17:30 hours.
Rare and valuable coin collections can often be worth millions
Exhibitors from all over
Important numismatic entities will participate in the event. Coin grading experts like PCGS, ANACS and NGC will have their stalls up at the event. PCGS will start accepting submissions for on-site grading of coins on 13th August and have advised attendees to the exhibition to check with a PCGS representative at their booth for the exact timings for acceptance of submissions.
The 2017 World’s Fair of Money was held at the Colorado Convention Centre in Denver, Colorado last August. The event had 500 bourse tables, which included a special sale by the US Mint that attracted considerable public interest. There were two auctions held at the 2017 event by renowned auctioneers – Heritage Auctions and Stacks-Bowers. The two auctions generated several million in sales. Interestingly, prior to the 2017 World’s Fair of Money, the previous one was held 11 years ago in 2006.
One of the most important considerations when investing in gold or silver is the purity of the metal you’re buying. Due to gold and silver being relatively soft metals, they are normally mixed with other metals to make them harder. Just a small difference in purity can have a massive impact on the overall value of the goods so It’s important to understand what the different figures used for measuring purity mean.
Millesimal Fineness
The purity of gold and silver bars/coins is normally referred to as “the millesimal fineness”. This measures the overall purity of precious metals based on parts per thousand. For example, if a gold bar has a fineness of 999 then it is made up of 999 parts gold to 1-part other metals. Because no form of gold available on the market is 100% pure, the purest gold bullion bars and coins, normally have a millesimal fineness of 999 or 999.9. The finer the purity of the metal, the higher its value.
“Buying gold – 5 reasons to invest”, a must-watch video for gold investors.
Like gold, silver is often measured using millesimal fineness, with the purest form of silver measuring .999. When investing in silver, however, you may come across terms such as “Sterling silver or “Britannia silver”. These hallmarks are direct references to the metal’s purity and can be found stamped on the metal itself. Both Britannia silver and Sterling silver is slightly less pure than fine silver with Britannia silver measuring 95.8 and sterling silver 92.5 on the millesimal fineness scale. Some silver bars are made in Sterling silver as are certain collectables and antiques. Britannia silver was a standard first introduced by the 1696 Coinage Act. No coins are currently minted in Britannia Silver, the last being the 2012 edition Silver Britannia.
999.9 fine gold bars
Karats
When buying gold or silver in various forms, you will sometimes find that its purity is measured in “karats”. Gold jewellery, for example, is often measured in karats. The purest form of gold is 24 karats; however, it only needs to have a millesimal fineness of 990 to obtain this status. The reason why karats are not used to measure the purity of gold and silver bullion is that they are not a fine enough measure, however, you can work out the “fineness” of precious metals measured by dividing the karat by 24 and multiplying the value by 1000. For example, a 12-karat gold necklace has a purity of 50% – 12 divided by 24 x 1000. Different countries also have different rules on the minimum purity levels required for gold and silver. Therefore, when trading in gold and silver abroad, you should be aware that what classifies as 24/18 karat gold in one country might not necessarily be the same in the UK.
Verifying the purity of precious metals
Currently, there are only two-real methods of verifying the marked fineness of precious metals and one of these methods requires destroying it completely in order to separate the different metals within it. This is known as assaying the metal. The other method uses x-ray fluorescence to determine the metal content. However, this method isn’t 100% accurate as it only measures the outermost section of the metal and therefore might get fooled by thick plating. Due to the difficulty in being able to determine the true purity of precious metals, it is always advised that you buy gold or silver from a reputable broker or dealer so as you can be assured that you’re getting what you’re paying for.
999.9 silver Queen’s Beasts coin
Invest in gold & silver through physical gold
If you’re looking to invest in gold or silver, then the best way to do so is by purchasing bullion. Bullion is the highest purity form of gold and silver and can be purchased in the form of bars (such as our 1KG silver bar) or bullion coins. Here at Physical Gold, we stock a wide range of gold and silver bullion including legal tender coins produced by the Royal Mint and gold bars in various sizes including 1oz, 100g right up to 1kilo bars. For more information on measures for gold and silver purity or to ask our advisers any questions on the best way to invest, please give us call on 020 7060 9992.
Rewarding employees is a great way to improve morale and increase motivation within the workplace. Whilst many companies offer money-based bonuses, physical gifts can also sometimes be awarded to employees. In the past, employees were often rewarded with gifts such as carriage clocks or gold watches for their performance, whilst today employees are more likely to be gifted items such as tv’s iPhones or tablets.
Bonuses of gold and silver are also sometimes gifted to employees. This is usually given in the form of bars or coins. For employers looking for a more creative way to reward their staff, gold and silver may represent the perfect option.
Reasons why you should consider rewarding staff with bonuses of gold and silver
There are now many companies which award their staff some form of monetary bonus. It has reached the point where it has become almost expected by many employees. Staff have to wait until the end of the year to receive any sort of financial bonus and they are not always enough of an incentive on their own to keep your workforce fully motivated. Bonuses of gold and silver are a much more personal reward idea. They hold their value over long periods of time and make for a timeless, unique bonus. Not only are they something that can appreciate in value, but they are also less likely to be frittered away, in the same way, that an end of year bonus might.
Gold and silver are available in a wide range of forms
Gold and silver bullion is available in both coin and bar form, offering a wide range of possibilities for employers in terms of bonuses. Whatever value you’re looking to gift as a bonus, you will find something that fits your requirements. A gold bar, for example, might make for a great retirement bonus. You could even have it engraved with a personalised message thanking your employee for their contributions over the years, making it a very special and personal bonus gift.
Bars are just one form in which gold can be supplied
Tax advantages
PAYE tax and National Insurance contributions must still be deducted from bonuses of gold and silver using the employer’s usual payroll procedures, however, gold and silver bullion often comes with certain tax advantages. For example, all legal tender coins in the UK are completely free of Capital Gains Tax whilst coins such as gold sovereigns are free from VAT.
Gold and silver coins
Coins make an ideal bonus gift. They are quite small and can be easily presented in a nice case or sleeve. There is an element of mystique surrounding coins, gold coins in particular, and they are seen as something precious and valuable. Presenting an employee with a gold coin can make them feel valued and special. It’s not something that would find at your local department store or everyday retailer unlike bonus gifts such as TVs or the latest iPhone. Here are some great examples of bullion coins that would make a very special bonus gift.
Gold Sovereigns
Gold sovereigns will probably go down in history as one of the finest ever examples of British coinage. First minted in 1489 on the orders of King Henry VII, it was the largest gold coin ever minted in Britain at the time. Today gold sovereigns are no longer in general circulation; however, they are still are still classed as legal tender along with British Bullion coins such as Britannia’s and Queen’s Beasts coins.
Gold sovereigns are stunning examples of British design and craftsmanship. They are often given as special gifts on important occasions and are a perfect reward bonus for a hard-working employee. Steeped in history there are many examples of gold sovereigns in the UK including those that have been in circulation as well as bullion coins. Browse Physical Gold’s selection of gold sovereign’s here.
Queen’s Beasts coins
Queen’s Beasts coins are a stunning collection of coins made up of 10 different coins each featuring one of the 10 heraldic beasts present at Queens Elizabeth II’s coronation. Available in either gold or silver, Queen’s Beasts are very high purity coins containing .9999 silver/gold bullion. Like gold sovereigns, Queen’s Beasts coins are also considered Legal tender in the UK and are therefore free from Capital Gains Tax. With their stunning designs and high bullion content, Queen’s Beasts coins would make an excellent bonus gift. Browse Physical Gold’s Queen’s Beasts range here.
2oz Silver Queen’s Beasts coin
Order gold or silver through Physical Gold
Physical Gold are specialist dealers in gold and silver. We offer a wide selection of investments at leading market prices, many of which are Tax and VAT free. These include bullion coins, gold sovereigns and gold/silver bars. Get in touch today to find out more by giving us a call on 020 7060 9992.
While the proverbial ‘high street gold shop’ is not completely obsolete just yet, a large percentage of the gold trade has moved online. Buying gold through a reputed online trader gives you access to a range of different products that you probably won’t get in your high street shop anyway. Moreover, large online traders are able to offer better prices by cutting out the middleman. If you think about it, the high street gold seller who operates from a small shop is really just a middleman.
Mistrust of buying gold online
In spite of that, there are investors who do not trust the online trade in precious metals. They still hold on to the notion that the best way to buy gold is to see, touch and feel it. This sentiment is perhaps one of the reasons they go to a store nearby to buy their gold and end up paying a lot more.
Glitzy high street gold shops often have limited inventory
The cons of buying ‘nearby’ gold
You’d think it’s a no-brainer. Let’s quickly review the advantages of buying online as opposed to buying from a local shop.
By buying online you have access to a much greater collection of gold products and pay less at the same time.
Your trade remains anonymous and remains under wraps. One of the biggest disadvantages of buying gold ‘nearby’ at a store is that you can become an easy target for theft.
Since your transaction takes place through a digital medium, there is an online record of your payment. In all probabilities, you would pay for your purchase using a debit or credit card or maybe a bank transfer. In any event, a record of this transaction is created at both your bank as well as the dealer’s bank. Once this online trail is created, it cannot be deleted and this protects you in the event something goes wrong. Many credit cards also offer buyer protection up to a certain amount.
Often local gold shops ply their trade based on word of mouth and footfall. However, this is not necessarily a good thing. If you’re new to buying gold and don’t know about all the dos and don’ts, you’re likely to make a mistake when buying at the shop. Online traders, on the other hand, have limited human contact with you as a customer and would always try to display professionalism.
Benefits of buying from an online gold trader
Online brokers like Physical Gold, today source gold in the form of bars and bullion direct from global manufacturers and due to the large volumes, they get preferential rates. You can gain from this, as online brokers are more likely to pass on their savings to you. This is simply due to the fact that they do not have an expensive high street showroom to run and pay out utility bills, rent, salaries, etc.
Call our team of professionals to get helpful tips on buying gold online
At Physical Gold, we pride ourselves on our professionalism and commitment to customer satisfaction. We ensure that all our products are genuine and what’s more, we also offer our customers a buyback guarantee. Our experts are happy to advise you on the best way to buy gold online. Call us on 020 7060 9992 or simply send us a message online to connect with our team of experts.
When we speak about the baby boomer generation, we think about a number of revolutionary events that happened during the sixties. Images of flower power, the birth of rock n roll, Martin Luther King, man on the moon, the Vietnam War, the Beatles – they all come to mind. The baby boomer generation was born between 1946 and 1964. Much of what happened during their time shaped the world as we know it today. It is therefore ironic that such a futuristic generation could not plan financially to retire.
Baby boomers who are now between 53 and 71 years of age would require a savings kitty of $658,000 to retire comfortably. However, the survey revealed that the average boomer in the US had only $263,000 in savings, with a large shortfall of $395,000 to cover. This gap looks difficult to cover via the existing retirement income options available to those within the age groups.
Boomers in the higher age bracket of 65 to 74, who have either already retired or are close to retirement have so far managed an average of only $300,000 in their individual savings pots, which is still not going to be enough. British boomers were not far behind. Figures released by the Office of National Statistics (ONS) show an alarming 75% rise of people in their 50s and 60s working in the UK, with no signs of slowing down.
Early retirement is a pipe dream for these boomers as many haven’t saved enough for the rest of their lives. Moreover, with the increase in life expectancy, more money would now be required for these couples to carry on living comfortably. Saga, the company that caters to the boomers has christened them ‘generation W’ – the working generation.
The baby boomers are known as the progressive generation of the sixties
Conservative investment approach
Part of this predicament could be linked to their investment philosophy. Many boomers were hit particularly hard by the Great Recession, which greatly impacted the economies of industrialised nations. Many lost their careers, leading them to search for alternative employment. Their risk appetite took a nosedive during this period, leading to conservative investing trends. QS Investors, an investment management company found that boomers preferred to put more money in cash deposits, allocating 30% of their investable capital to this asset class. However, with abysmal interest rates since 2008, the goose they reaped in the past ten years could hardly be called golden.
Boomers also invested 24% and 22% in equities and fixed income products respectively. According to the new age asset allocation model put forward by an investment expert, distribution of assets between equities and bonds at the age of 60 needs to follow a ratio of 60 – 40. Of course, as we can see with the boomers, this is hardly the case. Boomers allocated only 8% in real estate and 2% in precious metals.
The boomer’s shortfall – other reasons
Of course, inflation is another factor that has eroded the savings of baby boomers. At a time when boomers could have been on their home run to make enough to beat inflation, the recession happened. Another important factor is that the new generation has also been disenfranchised by the recession, dashing their hopes of a new mortgage and financial independence. A recent study found that people under the age of 45 in Britain owned only 900bn pounds in assets. The struggles of the new generation have put pressure on many baby boomers, who are now having to support their children.
Call our investment experts to discuss your retirement
A lucrative investable asset class missed out by the baby boomers is precious metals. Call our investment experts now to discuss how building a gold nest egg can set your mind at peace during your later years. We offer SIPP schemes as part of our pension gold packages on which you can avail of a 45% income tax relief as a UK resident. Call our investment team on 020 7060 9992 or get in touch with the team online and an advisor will reach out to you at the earliest.
Investors who are serious about building a strong financial portfolio usually invest regularly. It doesn’t matter what asset class you pick, the periodic churning of your portfolio is the only way to keep it optimised. Building a precious metals portfolio is, of course, no exception.
When you invest regularly, you end up buying at various price points. So, you don’t have to worry about timing the market because the market fluctuations average out over a long period of time. For example, if you were to buy mutual funds and you invested every two months, you would build a sizable investment portfolio over a period of time, without laying undue financial stress on your budget, while gaining the advantage of averaging the various price points in the market out. Eventually, if you stayed invested for say, 6 years, you would make money.
As precious metals brokers and investment advisors, we often advise investors to put together a regular investment plan. Our monthly saver gold bundle is an excellent investment option for investors who aren’t sure about the products they want to buy. The minimum monthly threshold starts at £350 and we set you up to buy tax-free gold coins.
Investors receive different varieties of sovereigns and half-sovereigns delivered to their door. They cannot choose the coins they receive. Given that the spot prices of gold vary, you would also buy the coins at different price points, spreading your risk. This is a great way to build the foundations of a strong portfolio of physical gold. Before you know it, you would have amassed a small fortune. You can simply get started by filling out the form on this page.
A regular monthly investment can help you build a quality gold portfolio over time
The director’s pick
If on the other hand, you wanted to kick-start your gold portfolio, we also have a ‘director’s pick’ option. You can choose to invest a couple of thousand pounds, going all the way up to 50k. The tax-free gold coins you will receive are handpicked by our director, Daniel Fisher and have great investable value. All of our products come with a certificate of authenticity and we also offer a guaranteed buyback scheme.
Silver monthly saver
While we don’t run the same auto-pay monthly saver for silver, it’s still possible to regularly save in silver coins.Silver investors need to make individual purchases of silver from our online portal every month. Once an account has been created, single orders are very quick to complete.
Talk to our precious metal experts for the best investment options
At Physical Gold, we take customer satisfaction to new heights. Just call our team of investment experts if you’re unsure which monthly saver package is best for you. Call 020 7060 9992 or drop us an email and a member of the team will be in touch with you shortly. We are a BNTA registered precious metals broker and we always ensure that every customer gets the best value for their money. Call now.
Investors have consistently turned to gold for safety during times of global turmoil. If we study gold prices over 20 years, we can see that the demand for gold spiked at specific points in time, when the capital markets had crashed. This ‘safe haven’ driven demand sent the spot prices of gold skyrocketing at those specific junctures. Back in 2002, the price of gold registered an increase of 23.96% and the trend continued into 2003 with prices rising once again by 21.74%. Gold climbed 31.59% in 2007 as the world was pushed to the brink of recession.
The years of the great recession were 2007 to 2009. The US officially went into recession by December 2007, but the early reflections were felt through 2007, sending investors scurrying for gold. Likewise, the ripple effects were felt long after, and even now, the world has not completely recovered from the devastating effects of that recessionary period. Sure enough, gold hit a record high of $1420.25 per troy ounce during 2010 – 2011.
It may be concluded therefore that gold is simply a stop-gap cover for investors looking to hedge their risks against market uncertainties. But let’s stop for a minute and take a long hard look at gold prices again. Gold offers stability and provides steady returns for the long-term investor with a serious view and a sustainable time horizon. Prices of gold were only $369 in 1996 Through the ups and downs, gold has consistently emerged stronger, leading to a high of $1664 in 2012.
Investors need to look at gold as insurance for their portfolios and use steady returns to create a stable base for their portfolio. Those who waited were rewarded with fourfold increases in gold prices over a span of 20 years. These people were rewarded because they had stable investing habits, coupled with a long-term vision for gold. Having faith in your investments goes a long way and chalking out a timeline you can follow before cashing it in.
Having a sustainable investment horizon is crucial for enjoying success with gold
Is gold still a safe haven?
The world’s fair share of economic woes continue unabated and indeed, gold remains a safe haven for investors. Brexit uncertainties in Europe, the instability of the coalition and US-China trade wars are just a few reasons to stay invested in gold. The war on terror is an added factor in this toxic mix. Even if the uncertainty eases in the years to come, price trends have repeatedly shown us that gold prices have enjoyed a steady overall increase, in spite of short-term ups and downs.
Call our investment experts for sound advice in gold investing
At Physical Gold, setting gold investment strategies is what our investment team does best. We love to guide investors just like you on how and when to buy the precious metal. So, call us today on 020 7060 9992 or get in touch online to find out how a long-term view on gold may be just what you need in the years to come.
Mobiles sell by their billions each year, with smart devices and feature phones proving essential for modern life. But as handsets are replaced and e-waste mounts up, the focus is turning to recycling and the recovery of gold and other salvageable items from old mobile phones.
Old phones offer gold recovery opportunities
Phones as a gold mine
Even with the first dip in sales reported in the final three months of 2017, mobiles remain a hot property on the global market. What unifies every device, no matter its feature set or price, is a reliance on electronic circuitry and, by association, various precious materials.
Gold is present in fairly small amounts within almost every mobile that has ever been manufactured. An iPhone, for example, contains about 0.034g of gold. When you consider that in the UK alone the average consumer discards up to 25kg of electronic waste annually, it’s clear to see how quickly this waste can accumulate.
Other treasures exist…
Gold is not the only valuable substance found within phones. Collectively it is theoretically possible to recover 34kg of gold from a million mobiles, along with a hefty 350kg of silver and a full 16 tonnes of copper. Since there is a limited amount of gold in the world, such a resource shouldn’t be ignored.
The e-waste issue
The problem with all that gold being locked up in old phones starts when you look at upgrade trends and recycling rates.
Most people replace their phone once every two years, although this varies in different parts of the world. This is good for manufacturers in terms of sales, but bad for the environment because the illegal dumping of e-waste is rife, with levels as high as 90 per cent by some estimates.
The next issue that has to be overcome is that once old phones have been collected, it’s necessary to go about extracting their precious metals as efficiently and affordably as possible.
Older strategies have been criticised for their use of toxic substances, including cyanide, creating additional complications in terms of the environmental impact.
But methods are changing for the better….
The good news is that techniques are improving, new chemical processes are being developed and recovery efforts are being streamlined and rolled out in many countries. Research carried out at Edinburgh University has been important in this respect and might even impact the price of gold in the future.
Some countries are taking a more proactive approach to this than others. In Japan, the medals for the 2020 Olympic Games will be made from gold recovered from old phones. This raises awareness about the issue in a way that makes it easy for the public to connect with. Furthermore as gold is a more stable investment prospect than newer alternatives, there are yet more motivations to boost recovery efforts.
Get in touch with our experts for incisive advice on gold
Looking to learn more about gold and its uses? You can talk to the specialists at Physical Gold to get the lowdown on how this precious metal remains hugely influential around the world. Speak to us by calling 020 7060 9992 or contacting us online for more information.
Bollywood is a hugely popular branch of global cinema, selling around two billion tickets a year in India alone and wielding vast cultural influence. But why is gold the metal, and the colour, so commonly featured in Bollywood movies?
Traditional Indian clothing and jewellery with gold detailing
Gold in Indian Culture
To trace the roots of gold’s power on the silver screen in Bollywood, we have to look at how gold is perceived and used in the country that gave birth to this cinematic phenomenon.
While many countries see gold as a status symbol or investment opportunity, its significance in India goes much further than a simple expression of individual wealth. It is tied to cultural traditions and religious rituals alike.
Weddings in India are a perfect example of this. There are around 10 million each year and 50 per cent of the nation’s total spending on jewellery is specifically focused on preparing for the marriage event. The richest families will happily splash out hundreds of thousands of pounds on gold for weddings.
Edible gold is also a huge trend in India, with expensive sweets made using gold leaf that has been pummelled wafer-thin seen as a delicacy amongst those that can afford them.
With gold being ever-present in Indian life, it’s easy to see why it also plays a major role in the movies the country produces.
Gold in Bollywood
Onscreen, gold can be seen in the jewellery that characters sport and in the elaborate costumes they wear. It often features prominently in promotional material for the movies themselves, as posters for movies like Mogul and King of Bollywood demonstrate.
In terms of the Bollywood movie plots which revolve around gold, a classic example is Jewel Thief, released all the way back in 1967. Its plot focuses on a case of mistaken identity, a gold-obsessed crook and of course a healthy dose of romance.
A more recent Bollywood movie that puts gold front and centre is Players, which hit screens in 2012 and was India’s answer to vintage crime caper The Italian Job. Interestingly it was inspired not by the original Michael Caine film, but by the 2003 remake starring Mark Wahlberg.
Tasked with capturing a huge haul of gold bars with a value equivalent to over £1.1 billion, the attitude-fuelled gang at the core of the plot indulge in a few more musical numbers than Western audiences would expect to see in a gold heist.
Away from the cameras, the stars of Bollywood are just as committed to embracing the culture of gold, whether it be with their highly publicised wedding outfits or their endorsement deals with jewellery firms. The colour itself remains an inspiration for the frocks the female stars sport at major industry events, including the Golden Globes.
Get gold investment advice from Physical Gold
Our team of investment specialists will help you out with any questions you might have, whether you have gained an interest in gold from watching Bollywood movies or appreciating Indian culture in other ways. Email us via our site or call 020 7060 9992 to get bespoke guidance.
A country’s monetary policy usually has some kind of knock-on effect on the prices of all stocks, bonds and commodities. Of course, although we view gold and silver as precious metals, they are essentially traded as commodities. So, all monetary policies will have certain effects on the gold and silver markets. Investors are often confused about what quantitative easing really is and how this move affects markets. Let’s dive in and find out.
What is quantitative easing?
Firstly, quantitative easing is not a normal step taken by the central bank of a country. It is an extraordinary and somewhat unconventional move in which a country’s central bank basically increases the money supply. Many of you may think that’s inflation. But we must understand that quantitative easing does not involve the printing of extra banknotes. The central bank (in the UK it would be the Bank of England) simply buys government securities and other financial instruments from the market in a bid to lower interest rates and increase the money supply, thereby creating more liquidity.
An explanation of quantitative easing from the Bank of England
So, the assumption here is that lowering interest rates would add stimulus to the economy by encouraging industry to invest more. When companies invest and start new projects, more jobs are created and additionally, there is a positive ripple effect that kick starts smaller suppliers to also start providing services to the bigger players.
Gold is a safe haven for investors during times of uncertainty
What are the benefits of quantitative easing?
So, quantitative easing (QE) increases the supply of money and financial institutions benefit by increasing their capital base. This promotes lending and increases liquidity, ushering in a revival of the economy. Quantitative easing is usually a step taken when short-term interest rates have fallen to zero or are nearing zero levels. Going by past experience, we can say that if the central banks invest $600bn, the move typically triggers a fall in interest rates of 0.15 to 0.2%.
When did the UK first start exploring quantitative easing and what were the results?
At the height of the last financial crisis, in 2009, the interest rates were dropped to 0.5% for the first time in the history of the Bank of England. The UK economy badly needed a shot in the arm and the first QE programme for the UK was started with an infusion of £75 billion. This was eventually raised to £200 billion. The programme was rolled out on 5th March 2009. The Bank of England had been contemplating a drop in interest rates to 0.5% from 1.00% for a while. By November 2008, the financial pundits of the Gordon Brown government knew that the drop to 0.5% wasn’t going to be enough. It had to be backed by a parallel strategy that could save Britain from going into a long drawn economic depression.
Alistair Darling, the Chancellor of the Exchequer adopted a financial technique that had been used in Japan during the early 2000s. Interestingly, the same technique had also been adopted by Ben Bernanke, the chairperson of the American Federal Reserve, during the US chapter of the crisis, which triggered the fall of Lehman Bros. The radical macroeconomic technique was designed to put cash back into the hands of banks by buying out the government and corporate bonds they held.
These resources would have a two-pronged effect. Firstly, the new demand for these gilts would drive up their prices, triggering the required fall in the interest rates. Banks would now have money to pump back into the economy and things would be easier for businesses and individuals, as the cost of borrowing would be radically reduced. That was pretty much how the under-performing banks like RBS were saved back in the day. The government was able to bail them out via the QE programme.
Many homeowners also rejoiced at the time, since their mortgage repayments dropped to a negligible level. Many homeowners across Britain seized the opportunity to opt for capital repayment, ensuring that banks were able to recover their sub-prime housing loans, injecting more cash into their reserves. The move was hailed as having a double whammy effect for the sub-prime housing market in the UK. While the banks were able to claw back the money they had loaned, homeowners were able to reduce their debt exposure and free up equity in their homes.
However, many critics have been sceptical about the success of the U.K.’s QE programme. It has been 11 long years since the programme was rolled out. It had been purported as an emergency measure, designed to revive the economy and not a permanent fixture. Additionally, interest rates never recovered completely and remained near zero, as we plunge headlong into the next financial crisis. So, the verdict in the minds of many is that the program was a relief mechanism that did not have long-term success. However, in the backdrop of these criticisms, one must not forget that the UK has had the longest sustained quarterly growth record of any G-7 nation.
What quantitative easing was taken during the Coronavirus pandemic of 2020?
US response
On 15th March 2020, the US Fed announced its fourth round of quantitative easing. The Fed is purchasing $700 billion worth of mortgage-backed securities ($200 billion) and treasuries ($500 billion) with three main priorities:
boosting liquidity within financial systems and
increasing the aggregate demand by expanding the supply of money
helping the US to avoid going into a recession
Part of the Fed announcement from 15th March said
“We haven’t set a gradual schedule for QE, quite deliberately. This crisis in UK financial markets demanded more. We will act in the markets promptly and rapidly as we see appropriate. The alternative was a run on sterling, a flight to the dollar and a complete breakdown of the UK financial system’s core.”
On March 23rd, 2020 the Federal Reserve announced:
“it would purchase an unlimited amount of Treasuries and mortgage-backed securities in order to support the financial market.”
UK response
On 19th March 2020 the Bank of England increased quantitative easing in the UK by £210 billion (from £435 billion to £645 billion) through the purchase of government bonds.
Andrew Bailey the new Governor of the Bank of England announcing the £210 billion quantitative easing said:
“We haven’t set a gradual schedule for QE, quite deliberately. This crisis in UK financial markets demanded more. We will act in the markets promptly and rapidly as we see appropriate. The alternative was a run on sterling, a flight to the dollar and a complete breakdown of the UK financial system’s core.”
“As partial lifting of the measures takes place, we see signs of some activity returning. We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.”
All quantitative easing to date by the central bank for quantitative easing purposes have been (click here for further details):
November 2009 – £200 billion
July 2012 – £175 billion and
August 2016 – £60 billion
March 2020 – £210 billion
June 2020 – £100 billion
EU response
On 18th March, Christine Lagarde the President of the European Central Bank announced the €750 billion Pandemic Emergency Purchase Programme (PEPP). This was for the purchase of private and public sector securities to mitigate the economic risks caused by the COVID-19 pandemic. Purchases will be made up until the end of 2020 for all asset categories, which are eligible under their asset purchase programme.
On 4th June, the EU announced an additional €600 billion of quantitative easing with an aim of controlling inflation and stimulating vulnerable areas of the EU economy caused by the COVID-19 pandemic. This brings the total response to €1350 billion of quantitative easing when added to the €750 billion from March.
Relative comparisons of response – US, UK and EU
Although, this is a moving picture as at 22nd March the following amount of quantitative easing has been provided by the 3 different central banks:
US – $700 billion – 3.3% of GDP initially, but this is unlimited
UK – £310 billion – c14% of GDP and
EU – €1350 billion – c13% of Eurozone GDP
The US response was the first and is now seen as a small intervention in the markets. Almost certainly there will be further rounds of quantitative easing from the 3 central banks.
How did the 2008 financial crisis affect QE?
The 2008 financial crisis triggered massive falls in interest rates in the UK. As the crisis broke out, interest rates were at 4.5% on 8th October 2008. By 5th March 2009, it had fallen to 0.5%. Unemployment rose as businesses failed due to their cash flows being affected by the bank’s refusal to lend. Overall consumer confidence plummeted and the entire economy entered a bearish phase. By March 2009, quantitative easing was introduced. The Bank of England put in an initial tranche of £75bn in new money, rising up to £375bn eventually.
If you want to know “How to sell gold for the most cash”, watch our YouTube video.
The Bank of England actually called it ‘asset purchase facility’ and bought assets from financial institutions like high street banks. Many of us remember the bailing out of Northern Rock at the time. The Bank of England formally started its QE program on 5th March 2009 after bailing out the high street banks. Initially, it was just long-term government bonds, but by the 25th of March, the program had been expanded to purchasing corporate bonds as well, in an effort to boost business confidence and increase lending to companies. In 2013, Japan announced a massive QE program going into trillions of dollars to boost its economy, in response to the global financial crisis.
The Bank of England introduced quantitative easing in 2009 as part of the monetary policy
In recent years, the ECB has announced a halt to its QE programme, in spite of a continuing slowdown in the European economy. The ECB is currently investing 30bn euros in buying bonds, although this program was slated to phase out by the end of 2018, Coronavirus and the world economy has caused a change in plan!
What are the effects of quantitative easing on gold and silver?
So, now that we know what quantitative easing is all about and how large industrialised economies used it during the global recession, let’s look at how it affects the gold and silver markets. Well, firstly quantitative easing is a step usually taken by central banks during economic turmoil. We already know that gold and silver act as safe havens during these times. So, if we look at price charts for gold during the period 2009 to 2011, we can see that gold prices skyrocketed during this period.
According to economist Marc Faber, quantitative easing hurts currencies and sends people rushing to buy gold. In 2016 he predicted that gold would continue to rise on the back of the fourth round of QE undertaken by the US federal reserve. On June 14th, 2018 when the ECB made the announcement to phase out QE by the end of 2018, they also announced that the European economy was still soft and interest rate hikes would not take place till March 2019. This news saw the gold market responding positively on that very day. Therefore, we can surmise that while QE is good news for the economy in terms of its GDP growth at a time of crisis, it’s not good for the stability of currencies. It’s both these reasons that spur the rise of gold prices at these times.
Call us to know more about gold investments
Our investment experts can guide you on the best times to invest in gold and silver and how to approach them. Call Physical Gold Limited on 020 7060 9992 or get in touch online and a member of our team will get in touch with you shortly to discuss your investment objectives and how precious metals can be an important part of your investment plan.
Live Gold Spot Price in Sterling.
Gold is one of the densest of all metals. It is a good conductor of heat and electricity. It is also soft and the most malleable and ductile of the elements; an ounce (31.1 grams; gold is weighed in troy ounces) can be beaten out to 187 square feet (about 17 square metres) in extremely thin sheets called gold leaf.
Silver Information
Live Silver Spot Price in Sterling.
Silver (Ag), chemical element, a white lustrous metal valued for its decorative beauty and electrical conductivity. Silver is located in Group 11 (Ib) and Period 5 of the periodic table, between copper (Period 4) and gold (Period 6), and its physical and chemical properties are intermediate between those two metals.
