Why is the price of gold not soaring?

Here’s why it should be.

Yesterday the Bank of Japan, (BOJ), announced unprecedented steps, (for them), aimed explicitly at the creation of inflation, with a stated target of 2 per cent in two years. The new boys at the BOJ helm, (who were carefully hand-picked to ensure they would do this), used their first meeting to push through a raft of measures which more than sated even the market’s craving for action. This was heady stuff for central bankers, (especially Japanese ones, who for years have been notorious for under-delivery); they will aim to double the money supply to Yen 270 trn, (roughly USD 3 trn), in two years, almost doubling the amount of monthly bond purchases and lengthening the maximum permissible maturity to include 40-year bonds, increased the pace at which they will buy Exchange Traded Funds and Real Estate Investment Trusts, and even decided to ditch, (temporarily at first), its so-called ‘banknote’ rule, under which its total bond purchases were hitherto limited to the amount of Yen in circulation.

Not surprisingly these measures caused the yen to dive on the foreign exchange markets and Japanese 10-year government bond yields fell below 0.5 per cent. Only in Japan would investors be happy to buy these bonds, with that yield, 0.5 per cent per annum, when the government and the central bank is intent upon creating inflation of at least 2 per cent per annum-only in Japan because over 90 per cent of Japanese bond issuance is snapped up by domestic investors-individuals, pension funds, life insurance companies, government entities.

Will this continue happily forever? That depends on the degree of "success" which the BOJ’s policies enjoy. Japan Inc. had certainly better hope so, with interest rate payments already accounting for more than a quarter of government spending-even with interest rates at 0.5 per cent and lower for shorter maturities!

This is where gold should come into the picture - how can the world’s third largest economy embark on such an explicit inflationary policy without investors rushing to secure an inflation hedge by acquiring the age-old comfort of gold? One explanation is simply inertia; the market has endured nearly two decades of deflation in Japan and will take time to get worried about inflation there, secondly it will take time for Japanese liquidity to find its way into the global economy, but most importantly, the Cypriot and the North Korean crises loom large in investors’ minds and the only challenger to gold as a safe-haven is the US Dollar-hence an unstable equilibrium has formed with regard to the price of gold expressed in US Dollars.

If you believe that the Cypriot crisis will ultimately fade from memory and, pray God, North Korea is playing its old game of sabre-rattling to extort more aid, then someday soon gold will have its day and now is it great time to buy.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Our union backed Brexit, but that doesn't mean scrapping freedom of movement

We can only improve the lives of our members, like those planning stike action at McDonalds, through solidarity.

The campaign to defend and extend free movement – highlighted by the launch of the Labour Campaign for Free Movement this month – is being seen in some circles as a back door strategy to re-run the EU referendum. If that was truly the case, then I don't think Unions like mine (the BFAWU) would be involved, especially as we campaigned to leave the EU ourselves.

In stark contrast to the rhetoric used by many sections of the Leave campaign, our argument wasn’t driven by fear and paranoia about migrant workers. A good number of the BFAWU’s membership is made up of workers not just from the EU, but from all corners of the world. They make a positive contribution to the industry that we represent. These people make a far larger and important contribution to our society and our communities than the wealthy Brexiteers, who sought to do nothing other than de-humanise them, cheered along by a rabid, right-wing press. 

Those who are calling for end to freedom of movement fail to realise that it’s people, rather than land and borders that makes the world we live in. Division works only in the interest of those that want to hold power, control, influence and wealth. Unfortunately, despite a rich history in terms of where division leads us, a good chunk of the UK population still falls for it. We believe that those who live and work here or in other countries should have their skills recognised and enjoy the same rights as those born in that country, including the democratic right to vote. 

Workers born outside of the UK contribute more than £328 million to the UK economy every day. Our NHS depends on their labour in order to keep it running; the leisure and hospitality industries depend on them in order to function; the food industry (including farming to a degree) is often propped up by their work.

The real architects of our misery and hardship reside in Westminster. It is they who introduced legislation designed to allow bosses to act with impunity and pay poverty wages. The only way we can really improve our lives is not as some would have you believe, by blaming other poor workers from other countries, it is through standing together in solidarity. By organising and combining that we become stronger as our fabulous members are showing through their decision to ballot for strike action in McDonalds.

Our members in McDonalds are both born in the UK and outside the UK, and where the bosses have separated groups of workers by pitting certain nationalities against each other, the workers organised have stood together and fought to win change for all, even organising themed social events to welcome each other in the face of the bosses ‘attempts to create divisions in the workplace.

Our union has held the long term view that we should have a planned economy with an ability to own and control the means of production. Our members saw the EU as a gravy train, working in the interests of wealthy elites and industrial scale tax avoidance. They felt that leaving the EU would give the UK the best opportunity to renationalise our key industries and begin a programme of manufacturing on a scale that would allow us to be self-sufficient and independent while enjoying solid trading relationships with other countries. Obviously, a key component in terms of facilitating this is continued freedom of movement.

Many of our members come from communities that voted to leave the EU. They are a reflection of real life that the movers and shakers in both the Leave and Remain campaigns took for granted. We weren’t surprised by the outcome of the EU referendum; after decades of politicians heaping blame on the EU for everything from the shape of fruit to personal hardship, what else could we possibly expect? However, we cannot allow migrant labour to remain as a political football to give succour to the prejudices of the uninformed. Given the same rights and freedoms as UK citizens, foreign workers have the ability to ensure that the UK actually makes a success of Brexit, one that benefits the many, rather than the few.

Ian Hodon is President of the Bakers and Allied Food Workers Union and founding signatory of the Labour Campaign for Free Movement.