Market News
Gold allure beats crypto: Bullion offers the security that bitcoin lacks, says ALEX BRUMMER - THIS IS MONEY
France’s Liz Truss moments are happening with dangerous regularity.
The stalemate in Washington over debt limits, which has shutdown the American government, means several G7 rich countries are in a stew.
There is also weird stuff going on in the hard-to-navigate world of artificial intelligence (AI).
Tech giant AMD is signing a chip supply deal, with OpenAI earning the right to buy up to 10 per cent of AMD chips. Where this all leaves Nvidia’s $100billion is unknown.
Nevertheless, $10billion here and $100billion there and one is talking about real money being piled into a technology which has all the features of a speculators’ ball.
Sensible investors rightly are nervous. They need to recognise that savings in American 401(k) pension plans and Britain’s equity ISAs will not always zip up at recent speeds.
More opportunistic traders and managers are dipping into alternate assets.
Gold has shot up to over $3,950 an ounce, making a mockery of efforts by governments to de-monetise bullion. Bitcoin and other crypto currencies are on a tear with the former climbing above $125,000 in recent trades.
Richard Nixon cancelled the convertibility of gold into dollars way back in 1971. Unlike Gordon Brown, who started to sell the UK reserves in 1999, the US hung onto its holdings.
Fort Knox and the IMF’s own holdings of gold have proved a fantastic store of value. Indian and Chinese central banks cannot get enough of the stuff.
Retail investors and alternative funds find it hard not to be attracted by the surge in bitcoin and other crypto currencies.
A proliferation of exchange traded funds in the US has given crypto an air of respectability. Bitcoin lives on free air, and ‘mining’, the creation of new coinage, is a puzzle.
Bitcoin has proved a haven for financial skulduggery as the recent conviction at the Crown Court in London of Zhimin Qian for a £5billion crypto scam demonstrated.
The implosion at FTX and Sam Bankman-Fried’s conviction two years ago should have been enough to cool bitcoin enthusiasm.
The commissions charged by crypto brokers, up to six times higher than those trading conventional assets, is both profiteering and a signal not to engage.
Both asset classes signal dissonance with other assets over political risk and doubts about feasibility of multi-billion-dollar AI deals. Given a choice between gold and bitcoin, only bullion offers security.
Shawbrook return
New arrivals on the London Stock Exchange are welcome after a barren period. So the choice of private equity owners BC Partners and Pollen Street Capital to float Shawbrook in the City will be appreciated.
Before anyone becomes over-excited, it is worth putting this estimated £2billion return to public markets into some context.
Unlike other UK fintech start-ups, Shawbrook is wholly UK-based. It would have been bizarre to go elsewhere.
The return of a bank which has been in the hands of private equity where it has been tricky to look under the hood, demands caution.
A loan book of £37billion has been built by offering credit to mid-sized borrowers who have found it difficult to access funds via High Street lenders and needs scrutiny. It was bolstered by access to the RBS state aid scheme.
In Shawbrook’s case, that squared a circle as the bank grew out of RBS. The bank has been in the hands of private equity for eight years and there must be relief that it is finally to get a currency for future acquisitions and growth.
Anything which deepens the UK’s fintech presence is to be welcome. But be cautious of private equity bearing gifts.
Growth tax
The latest speculation is that Rachel Reeves will opt for a bank tax in her budget. Raising the current surcharge of 3 per cent is seen as most likely.
Or the Government could seek to reclaim some of the interest that banks earn on reserves lodged at the Bank of England – which has cost the Government £21billion so far this year. Few people, other than the bankers, would complain.
But the Chancellor should consider that more tax means less lending capacity and a further obstacle to growth.
