Rate hike prediction keeps gold price down, little impact from UK Budget
The Chancellor Philip Hammond delivered the Spring budget yesterday, the first in his role after taking over from George Osborne upon the appointment of Theresa May as Prime Minister. We have surmised the key points below.
What was notable was that there was no immediate impact on the price of gold. Gold news seems to be focussing more on the U.S. jobs report and news surrounding the Federal Reserve’s predicted rate hike.
Bloomberg reported that bullion for immediate delivery fell 0.3 percent to $1,204.14 an ounce by 9:40 a.m. in London
Bullionvault reported that the private-sector ADP report said US payrolls expanded by 298,000 last month, beating consensus forecasts of 190,000. A stronger dollar, twinned with this growth, has also put downward pressure on the gold price.
Swiss refining and finance group MKS Pamp’s dealing desk, was quoted by Bullionvault saying the Fed Funds futures market “has now priced in an 88-90% chance of a rate hike later this month, which has sapped the momentum of gold”. This is a marked increase from previous rate predictions, which have inched up consistently, rather than jumped.
Morning Star noted that, aside from the FTSE 100 staying flat, gold miner Randgold Resources (RRS) fell 2.3% in accordance with a sluggish gold price this week amid better economic outlook.
BBC News summarised the UK Budget as follows:
- The main rate of Class 4 National Insurance contributions for the self-employed to increase from 9% to 10% in April 2018 and 11% in April 2019
- The increases, applying to earnings between £8,060 and £43,000, will raise £145m a year by 2021-22 at an average cost of 60p a week to those affected. All Class 4 earnings above £43,000 will continue to be taxed at 2% while those below £8,060 will pay nothing.
- Class 2 National Insurance, a separate flat rate contribution paid by self-employed workers making a profit of more than £5,965 a year, is to be scrapped as planned in April 2018
- Taken together, millions of self-employed workers could pay an average of £240 a year more but ministers say those earning £16,250 or less will pay less
- No changes to National Insurance paid by the employed and employers or to income tax or VAT
- Personal tax-free allowance to rise as planned to £11,500 this year and to £12,500 by 2020
- £435m for firms affected by increases in business rates, including £300m hardship fund for worst hit
- Pubs with rateable value of less than £100,000 to get a one-year £1,000 discount on rates they would have paid
- Rate rises for businesses losing existing relief will be capped at £50 a month
- A £820m tax avoidance clampdown, including action to stop businesses converting capital losses into trading losses and introduction of UK VAT on roaming telecoms services outside the EU
- Privately-owned SMEs to get extra year to prepare for tax digitisation and quarterly reporting
- Review of taxation of North Sea oil producers
- Annual borrowing £51.7bn in 2016-17, £16.4bn lower than forecast
- Borrowing forecast to total £58.3bn in 2017-18, £40.6bn in 2018-19, £21.4bn in 2019-20 and £20.6bn in 2020-21
- Public sector net borrowing forecast to fall from 3.8% of GDP last year to 2.6% this year, then 2.9%, 1.9%, 1% and 0.9% in subsequent years, reaching 0.7% in 2021-22. But borrowing still predicted to be £100bn higher by 2020 than forecast in March 2016
- Debt rose to 86.6% this year, but will fall to 79.8% in 2021-22
Link to this article: : http://www.goldmadesimplenews.com/gold/rate-hike-prediction-keeps-gold-price-down-little-impact-from-uk-budget-13020/