Gold hits record high, meaning gold bars worth over a million dollars
Newsflash: the gold price has hit a new alltime high.
Spot gold has risen over its previous record high, set last Friday, to trade at $2,513.79 per ounce this morning.
This extends its recent gains, as gold has been lifted by expectations of cuts to US interest rates starting in September.
Falling interest rates support the gold price, as they make alternative assets such as bonds and cash reserves – which pay interest – less attractive.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
The recent demand boom can be put down to growing expectations that the US Fed is set to cut interest rates in the coming months. Add in central bank buying, demand for portfolio hedges, and global uncertainty; it’s been a recipe for strong demand over the year.
Gold has now risen almost 22% so far this year. And it may have further to rise, with investment bank UBS forecasting prices could reach $2,600 an ounce by the end of 2024.
At current levels, a standard bar of gold is worth one million dollars.
With gold bars typically weighing about 400 ounces, that would make each one worth more than $1 million.
Gold Bars Are Worth a Million Dollars for the First Time
The common 400 troy ounce (12.4 kg) gold bar is worth a million dollars nowhttps://t.co/LFHfax50Yx
— Amit Paranjape (@aparanjape) August 20, 2024
Key events
Bundesbank predicts Germany will avoid recession
Germany’s central bank has predicted that Europe’s largest economy will avoid falling into recession this year.
In its latest monthly report, the Bundesbank said Germany would avoid a severe economic slump – despite a surprise contraction in the second quarter.
It predicted German GDP would rise in the July-September quarter, having shrunk by 0.1% in April-June.
The Bundesbank explained:
“From today’s perspective, a recession in the sense of a significant, broad-based and long-lasting decline in economic output isn’t to be expected as long as no new negative shocks occur.”
But, while output is expected to “increase slightly” in the third quarter, the Bundesbank cautioned that “this means that the expected slow economic recovery will be further delayed.”
Rising energy costs could push more companies into insolvency, fears John Cullen, insolvency partner at Menzies:
“The increase in compulsory liquidations appears to be a legacy of businesses that have failed since Covid and that is likely to continue for a time yet. The slight decrease in the amounts of insolvencies, seasonally adjusted, is hopefully a sign that we have seen the worst.
However, with the cost of energy possibly on the increase, we will have to wait and see if this trend continues. January and February next year will be telling months in my opinion.”
Insolvency rate still lower than in 2008-09 crisis
One in 177 companies on the Companies House effective register went bust between 1 August 2023 and 31 July 2024, today’s insolvency data shows.
That’s a rate of 56.6 per 10,000 companies – rather lower than during the financial crisis, as there are more companies in existance today.
The Insolvency Service explains:
While the insolvency rate has increased since the lows seen in 2020 and 2021, it remains much lower than the peak of 113.1 per 10,000 companies seen during the 2008-09 recession. This is because the number of companies on the effective register has more than doubled over this period.
More companies went bust in past year than during financial crisis
More companies in England and Wales went bust in the last year than at the height of the financial crisis, the latest insolvency figures show.
There were 25,551 insolvencies in the 12 months from August 2023 to July 2024, new data from the Insolvency Service released this morning shows.
That’s more than in the year from August 2008 to July 2009, when 25,186 insolvencies were recorded (see data here). That period covered the collapse of Lehman Brothers in September 2008, which was followed by the ‘Great Recession’ of 2009.
Rebecca Dacre, partner at Forvis Mazars, the international audit, tax and advisory firm, says:
“The latest insolvency figures are a strong reminder that many businesses are still a long way off from recovery.”
“Despite initial signs of improvement in the economy, some sectors are still experiencing severe difficulty as interest rates remain high. Falling consumer spending during the cost of living crisis has also made it incredibly difficult for some businesses to survive. The retail and hospitality sectors have borne much of the brunt.”
As covered at 9.51am, company insolvencies fell by 7% month-on-month in July, to 2,191, or 2150 on a non-seasonally-adjusted basis.
The worst month for insolvencies in the last year was November 2023, when 2,467 were recorded.
But during the financial crisis, company failures peaked in October 2008 at 2,732.
David Hudson, restructuring advisory partner at FRP, says high interest rates, weak demand and rising costs have all pushed up insolvency levels in recent months.
Hudson adds:
We expect insolvency levels to remain elevated for some time yet.
While economic conditions are improving, there are many businesses that have had their resilience ground down since the onset of the pandemic and that are now carrying large amounts of debt, which they’ll struggle to maintain even with falling rates and strengthening consumer confidence.
£1bn wiped off BT’s value after Sky wins CityFibre deal
One billion pounds has been wiped off the value of telecoms company BT this morning, after Sky struck a broadband deal with one of its biggest rivals.
Sky has decided to roll out its Full Fibre Broadband on internet provider CityFibre’s network.
CityFibre can currently reach 3.8 million customers, and is aiming to more than double that to 8 million premises “over the coming years”.
The partnership looks to be a blow to BT, which currently hosts Sky’s broadband customers on its high-speed Openreach network.
Greg Mesch, CEO at CityFibre says:
“This partnership with Sky is a huge vote of confidence in our business and has cemented CityFibre’s position as the UK’s third digital infrastructure platform.
With demand for digital connectivity continuing to grow, CityFibre’s network can provide the quality and reliability that people need and the infrastructure competition the UK deserves.”
Shares in BT have dropped by 6.8% this morning, down 9.9p to 135.6p, to the bottom of the FTSE 100 leaderboard.
That knocks its market capitalisation down to £13.47bn, down from £14.44bn last night.
AJ Bell’s head of financial analysis Danni Hewson says BT’s shares came under pressure on fears of an enhanced competitive threat for its Openreach broadband operation.
But, she adds:
CityFibre’s modest scale and focus on rural areas suggest it shouldn’t be a huge issue.”
Gold now over $2,525/oz
Gold is continuing to rally, and has now hit a new alltime high of $2,525.24 per ounce.
Gold traders are refocusing on the prospect of lower U.S. interest rates, attracting Western safe-haven seekers back to the market, as shown by inflows into physically backed products, said Carsten Menke, an analyst at Julius Baer (via Reuters).
Eurozone inflation confirmed at 2.6% in July
We have confirmation that inflation ticked up across the eurozone last month.
The euro area annual inflation rate was 2.6% in July 2024, up from 2.5% in June, statistics body Eurostat reports. That’s in line with the preliminary estimate, at the end of last month.
Eurostat says:
The lowest annual rates were registered in Finland (0.5%), Latvia (0.8%) and Denmark (1.0%). The highest annual rates were recorded in Romania (5.8%), Belgium (5.4%) and Hungary (4.1%).
Compared with June 2024, annual inflation fell in nine Member States, remained stable in four and rose in fourteen.
Core inflation, which strips out energy, food, alcohol & tobacco, was 2.9% for the third month running.
More than 10,000 people fell into insolvency last month.
Official data shows that 10,524 individuals entered insolvency in England & Wales in July, which is 24% more than in July 2023. It’s slightly lower than in June, when there were 10,548 individual insolvencies.
Company insolvencies fall in England and Wales
Just in: there’s been a welcome fall in the number of companies collapsing in England and Wales.
The Insolvency Service reports that there were 2,191 registered company insolvencies in England and Wales in July 2024. That’s a 7% fall compared with June.
However, it’s 16% higher than a year ago, as there were 1,890 insolvencies in July 2023.
The Insolvency Service says:
The number of company insolvencies remained much higher than those seen both during the COVID-19 pandemic and between 2014 and 2019.
Company insolvencies in July 2024 consisted of 320 compulsory liquidations, the highest monthly number since before the COVID-19 pandemic.
There were also 1,691 creditors’ voluntary liquidations (CVLs), 155 administrations and 25 company voluntary arrangements (CVAs).
Chris Tate, partner at accountancy firm Azets, says poor cashflow management is often the biggest killer for strugging companies, explaining:
“Despite recent encouraging signs, a great many businesses are still being pushed into insolvency while the challenges faced by many others are often proving to be almost insurmountable.
“The August interest rate reduction from 5.25% to 5%, being the first in over four years, was welcomed by business but will not be enough to significantly aid those businesses who are highly leveraged.
“The traditional summer slowdown, added to ongoing economic challenges – extra costs, supply chain issues, pay increases, cautious customer spending – may be a decisive factor for many companies.
Pound hits one-month high
Sterling is also having a strong morning, gaining ground against the weakening US dollar.
The pound has hit its highest level again the US dollar in almost five weeks. It has hit $1.3012, which would be a one-year high if it closed there.
The pound has benefitted from optimism about the UK economy, which has been the fastest-growing G7 economy so far this year.
