Interest Rate Rise in UK - Impact on Precious Metals?

[BackyardBullion]

Well, its not a big rise in interest rates but it is something and maybe more will come over the course of the next few years to help combat inflation.

Traditionally higher interest rates have meant declines for precious metals as big players feel that government backed bonds are just as safe, if not safer than gold and silver. 

It will be interesting to see how the market reacts when the US puts the rates up. 

So many people think/thought that a rate increase is/was impossible because the ability to finance the debt is not there. 

Remember, this last year of 5% inflation has meant that that debt is 5% less significant that it was before. 

What are peoples thoughts?

[Piperscoins]

IMO 0.25% is still rubbish if we all remember 2-5% is normal .  These are supoosed to be emergency measures that were brought in donkies years ago. 

Mrs Pipers has done nothing but moan about the price of shopping this year yeas even more than she has talked about covid. 

Edited December 16, 2021 by Piperscoins

[Rll1288]

I think this was a token gesture as it won't make a dent in inflation and if they raise too quickly too soon we will defiantly go int recession... We have rising inflation low growth (I don't care what figures the Government provides) and with more semi lockdowns and disruptions with Brexit still yet to take hold... @Stagflation@ in my mind

[Rll1288]

Oh and BTW inflation at 5%... Bah Humbug... food prices have gone up much more, as well as goods and services that have crept up... petrol 149 a litre... the true figure is much higher and for me at this time the governments eyes are not truly fixed on it at the moment

[Rll1288]

48 minutes ago, BackyardBullion said:

Well, its not a big rise in interest rates but it is something and maybe more will come over the course of the next few years to help combat inflation.

Traditionally higher interest rates have meant declines for precious metals as big players feel that government backed bonds are just as safe, if not safer than gold and silver. 

It will be interesting to see how the market reacts when the US puts the rates up. 

So many people think/thought that a rate increase is/was impossible because the ability to finance the debt is not there. 

Remember, this last year of 5% inflation has meant that that debt is 5% less significant that it was before. 

What are peoples thoughts?

Yes a good point.... the US as well won't mind if inflation erodes its debt as China owns a fair chunk of it.... basically they have devalued their CCY without saying as such

[Piperscoins]

18 minutes ago, Rll1288 said:

Oh and BTW inflation at 5%... Bah Humbug... food prices have gone up much more, as well as goods and services that have crept up... petrol 149 a litre... the true figure is much higher and for me at this time the governments eyes are not truly fixed on it at the moment

You are right spot on. 

[Gruff]

Interesting, I do think they will try and inflate the debt away, however with consumer price inflation rising it might get to the point where it is too much to ignore and they'll be forced to raise interest rates higher. Will that have a knock on effect into the stock market? Who knows. Traditionally it would be bearish for stocks as you say the safe haven is then government bonds. 
But with the debt load that has been printed/created any interest rate increase will increase repayment costs tremendously.

Will we see 1970's interest rates, no idea. But current debt creation is unsustainable. The flood of excess cash chasing an ever smaller pile of goods is driving inflation at the moment. I for one can't see an end to the current manufacturing/delivery delays, thus maintaining the pressure on inflation. The "Just-in-time delivery" system works well, until it doesn't and we can see clearly that it doesn't at the moment. 
With both the UK and the US over 100% of GDP it is risky. Contagion from a sneeze from China's overinflated property market and issues with energy (excuse the bad timing of the pun) could lead to all sorts of chaos in the markets. 

We've never had a time in history where the markets are leveraged like they are. How much is currently tied up in fragile risky assets that are in effect zombie entities that are being kept alive on the life support of almost interest free currency from the  central banks? Once they need to start repaying, the house of cards could come crashing down. 
 

16 minutes ago, Rll1288 said:

Oh and BTW inflation at 5%... Bah Humbug... food prices have gone up much more, as well as goods and services that have crept up... petrol 149 a litre... the true figure is much higher and for me at this time the governments eyes are not truly fixed on it at the moment

100% agree RII1288 - inflation is running closer to 12%, including the "exported" inflation from the US debt creation. 
They will never be truly fixed on it, to do so would be to acknowledge the Frankenstein monster that they have created. They are hoping the system will crash before too many people notice. Conveniently blamed on Convid and supply chain issues

 

[AppleZippoandMetronome]

30 minutes ago, Rll1288 said:

Oh and BTW inflation at 5%... Bah Humbug... food prices have gone up much more, as well as goods and services that have crept up... petrol 149 a litre... the true figure is much higher and for me at this time the governments eyes are not truly fixed on it at the moment

100% this. Comparing receipts for items I buy annually for my business there are some items I'm paying 40% more for this year vs last year. Fuel whether for the car or to heat the home is way up. I'm not sure what they're basing the 5% on but when you start comparing like for like items to the last few years it becomes a laughable figure.

As for the topic at hand I pretty much agree with what has already been said. I don't think its enough to make a meaningful difference.

[Rll1288]

25 minutes ago, AppleZippoandMetronome said:

100% this. Comparing receipts for items I buy annually for my business there are some items I'm paying 40% more for this year vs last year. Fuel whether for the car or to heat the home is way up. I'm not sure what they're basing the 5% on but when you start comparing like for like items to the last few years it becomes a laughable figure.

As for the topic at hand I pretty much agree with what has already been said. I don't think its enough to make a meaningful difference.

Well when they compile these lists they add or remove items, therefore the statistics never show the true rates (in my mind anyways). Not a conspiracy theory just what I have seen

[Rll1288]

The original question was... Will this affect Gold & Silver prices? the answer is not a simple one. This hike is already discounted and we will see the true movement a few weeks from now when we see what the large Hedge funds are doing. If they are staying out then they have come to the same conclusions that many of the worlds economies are c**p.  Rates would need to rise further and faster to see a real sell off of PMs. My opinion 🙂 and does nto constitute financial advice hahaha

Edited December 16, 2021 by Rll1288

[Gruff]

3 minutes ago, Rll1288 said:

Well when they compile these lists they add or remove items, therefore the statistics never show the true rates (in my mind anyways). Not a conspiracy theory just what I have seen

Of course, the narrative suits to always downplay inflation. 
To quote Milton Friedman: “Inflation is taxation without representation.”

[Pete]

An unmeasurable rise really but some will say a doubling of the rate blah ... blah..
I bet the mortgage lenders will be quick out of the starting blocks and poor savers will see an extra 30 pence a year on their savings, still depreciating in purchasing power by over 5% per annum and forecast to get even worse. This is how to settle your national debt - print money to devalue it whilst adding inflation to make it worth even less so you never have to pay back what you borrowed. In times of inflation and QE you would assume the big bankers would prefer gold.

[MancunianStacker]

Lenders seem to be passing on the increase in Jan/Feb to close to Christmas now I guess.

Pre 2008 the rates were normal at 4%, it will take time to get back up to those levels the BOE doesn’t usually move more than .25% per month but still that could be 3% each year if they push hard. Who knows 🤷‍♂️ 

[JoncreteCungle]

Stocked up on the pasta we use in September, went back yesterday to restock and the same pasta in the same shop has gone up 20% in the meantime. Gas, electricity, diesel etc all up markedly. A poxy rate rise will make no difference to the inflation, money printing, overspending or debt levels imho. 
 

I don’t think such a small rise will do anything to tackle inflation or hammer precious metals price downwards. They talk the talk about inflation and rate rises, but I doubt they will walk the walk, remember it’s still transitory….   

[Rll1288]

Plus My wife looks at the packaging... some goods are around 10/15% less then they were a year ago with prices going up. Inflation should be based on the goods and its weight not just its packaging

[Gruff]

These central bankers have painted themselves into a corner with the decade plus of QE and loose monetary policy. Businesses and banks have become used to the monetary drug. They try and ease it and the markets will react badly. However to keep printing will destroy the FIAT system in the long run. I agree a .25% won't do didly for inflation

[jultorsk]

Otavio Costa tw@eted a couple days ago "None of us own enough tangible assets". Hot inflation combined with flat wages means without hard assets one's personal finances are going backwards, right? 

Today BoE also said they expect 6% inflation in the spring... so it's not going to go away by their estimates any time soon.

But, as for gold and silver - who knows. If the share markets throw a tantrum it's quite likely there would be rapid declines in PMs as well.

Here's a bit of a fun clip on how they calculate CPI in the States. Not sure what the components are in the UK, but assuming it's a similar mash-up?

  

[ArgentSmith]

NOV YOY RPI 7.1% when was the last time real interest rates were this negative. BOE response? a measly 100 basis point rise. Personally I believe PMs may suffer a temporary decline due to a general market correction. But no this is not bearish for PMs medium/long term, quite the opposite IMO.

[HerefordBullyun]

I fervently belive the FED cannot rase rates due to bond yields the on debt is too large.  $29000000000000 debt with annnual yeild of say 0.5% is a lot of money. The fed saying they are going riase rates - is a lie, thre times next year, they cannot, well they can but only at the expense and the demise of the taxpayer, and the taxpayer will just vote out the current president. Nearly a third of the debt has been created in the last 5 years, due to stimulus, wars and lending to wall st in the main. Its like comparing apples to oranges with the FED to the BOE.

Dont be surprised also that the BOE reverses decisons if the SHTF with the FED, espically if a world economic crash happens and thats closer than what people imagine. 

China and russia are using currency wars and ditching the dollar in abundance as many of the BRICS countries. 

Dont be surprised if there is war with Iran rather than Russia 1st. This whole Ukraine thing is a side show. Biden has already said hes not sending troops.

Real inflation in the US is cooking at 10-14% than the CPI lie.

You can see all the downsizing of products and same and high rate price hikes on everthing. Go to the Wall street silver thrreads on Reddit.

Its happening in UK but the rate isnt as bad but Idont belive UKs rate of inflation is also reflecting true. Next Year dont be suprised if you are paying £2 a litre of fuel if not more, oils predicted to go to $150 barrel and I can see it close to it - certainly over $100. 

Edited December 17, 2021 by HerefordBullyun

[JoncreteCungle]

Shadow stats calculate the current rate of inflation in the USA (using the methodology that was used in 1990 to calculate inflation) to be 10.5%. They also use the methodology used in 1980 to calculate inflation and that gives the figure of 15% for 2021.

 

http://www.shadowstats.com/alternate_data/inflation-charts

If the same exercise was applied to the UK numbers I suspect the result would be similar. 

[HerefordBullyun]

Paul volcker saved the economy by raising rates to %15 in the late 70s  early eighties -this case is different, because the debt was US was so much lower have a look the national debt clock as of today in 1980 https://www.usdebtclock.org/1980.html and then compare it todays https://www.usdebtclock.org/index.html few extra digits since. Then you can see the angle I am coming from about riasing rates with the fed. Also the fed being the world reserve currency, it has more liabilities than the UK.

 

[modofantasma]

A mate sent this re US debt. Haven't had time to check figures myself yet

[Rll1288]

Yep... its a whole new world we live in economically and socially

[GoldDiggerDave]

Traditionally interest rates have affected gold. 0.25 will not make the biggest swing either way.  Some are predicting 0.25 for the next few months. If we start seeing interest rates of 5-7% then yes I can see gold dropping.  I’d finally like to get half decent return on the cash in the bank.  Then again we are in crazy economic times where anything can happen. 
 

Best to have a wide portfolio. PM’s crypto’ and good old fashioned liquid cash. 
 

 

 

[Gruff]

8 minutes ago, GoldDiggerDave said:

Traditionally interest rates have affected gold. 0.25 will not make the biggest swing either way.  Some are predicting 0.25 for the next few months. If we start seeing interest rates of 5-7% then yes I can see gold dropping.  I’d finally like to get half decent return on the cash in the bank.  Then again we are in crazy economic times where anything can happen. 
 

Best to have a wide portfolio. PM’s crypto’ and good old fashioned liquid cash. 
 

 

 

I wouldn't hold your breath waiting for interest rate rises in on savings. But I expect to see lightening fast interest rate rises on loans/mortgages as banks try and capitalize on this miniscule rate rise. 
I expect to see the BOE and FED protest Wall St./FTSE with gusto next year at the expense of us common folk. 

So big rate rises to dent PMs might be slow in coming.