Gold loses its China glister
The nature of markets – as it says on the tin when one buys an investment product – is that they can go up or down. Last year the big, unpredicted surprise was the fall in the oil price when Islamic State was on the march and the Middle east in flames. In recent weeks we have seen the gold bullion price move in the same direction.
Conventional market wisdom is that in uncertain times the gold price spikes.
It might have been expected that the combination of the risks of Grexit, the end of the China share bubble and the continued expansion of IS’s activities from the Middle east to North Africa should have been a boom for the yellow metal.
After all, until recently it had been on a bull run which can be dated back to ‘Brown’s bottom’ in 1999 when the former Chancellor/Prime Minister made the infamous decision to sell off half of Britain’s reserves at $282.40-an-ounce.
Certainly gold looked a safe place during and after the financial crisis when the global banking system failed and stock markets fell. It assumed its traditional safe haven status. But in latest trades, starting in Asia, it has started to plunge, trading below $1,100-an- ounce its lowest level in five years.
The immediate cause of the latest fall was bear selling in Shanghai.
One of the triggers there seems to be the realisation that the Chinese central bank has lost its appetite f or bullion adding only small amounts since 2009 with its holdings dropping from 1.8pc of reserves to just 1.65pc.
The search for explanations is on in earnest. The best around at present is that with the interest rate cycle reaching its nadir in the United States, the world’s largest economy, US Treasuries will offer a yield that has become more attractive. Moreover, holding gold also becomes less advantageous as a store of value in an era of falling prices or deflation.
Japan is still failing to throw of the deflation monkey despite Abenomics and generous quantitative easing (printing of money).
Similarly in europe, deflation on the eurozone periphery is suppressing price rises, a trend reinforced by movements in the oil market including the likely return of Iran as an exporter.
When markets suddenly turn negative there are always losers. At the micro level it will be jewellers who hold excessive amounts although generous margins in wholesale and retail should protect them.
More serious could be the rush to the exit in lightly regulated exchange traded funds (eTFs) one of the simplest ways for investment funds and individual investors to gain access to bullion.
The FT calculates that one fund, SPDR, had outflows of 11 tonnes late last week.
The key for gold funds is to keep a decent cash-liquidity buffer. Without that the ‘safe haven’ could become as perilous as shark infested waters.
Winter’s chill
OF all Britain’s banks Standard Chartered has the worst story to tell since June 2011.
Its total shareholder returns (based on share price and dividend income) have plunged 24pc in a period when banks on both sides of the Atlantic have been strengthened. Bill Winters the new Standard Chartered chief executive who has just taken the reins of power, has a great deal to do if he hopes to turn things around.
At one and the same time, he has demoted his deputy chief executive Mike Rees, removing from him line management responsibilities, but kept him on board as a sort of manager-at-large. One can’t imagine that this is an arrangement that is any more than transitional as Winter searches for the buried bodies.
I can’t claim to know the intricacies of those people newly appointed to top jobs but some Standard Chartered watchers are distinctly underwhelmed by the elevation of Ben hung, former of the investor relations department, to be in charge of the all-important Greater China and North Asia region. Similarly, the rise of Tracy Clarke to the person responsible for europe and Asia puzzles some observers.
In making the changes Winters conjures up some stirring Churchillian language telling colleagues that StanChart needs to ‘harness energy’ and make the most of the bank’s ‘extraordinary potential’.
Can’t wait.
Buttoned down
FOR all of us born and bred in Brighton in the 1960s and 1970s the local brand Ben Sherman evokes great nostalgia.
As a teenager, a Ben Sherman button down shirt, often in bright colours, was along with the Levi jeans and Bobby Darin records (listened to at Lyon & hall on Western Road) one of the fixtures of our lives.
Good to see then that revived company looks to be moving into safe hands at Marquee Brands which having already acquired Bruno Magli i s seeking to put together a collection of high quality fashion firms.
We will be closely watching what ultimate owner Neuberger Berman has in store for a South Coast champion.