Brexit UK vulnerable as gold bar exports distort UK trade figures

Britain’s gold exports worth more than any other physical export

Gold accounted for more than one in ten pounds of UK exportsin July 2017

UK’s stock of wealth has collapsed from a surplus of 469bn to a net deficit of 22bn ONS error

Brexiteers argue majority of trade is outside EU,this is due to largeLondon goldexports

Single gold bar (London Good Delivery) is, at today’s prices, worth just over 400,000

There are few things you’ll ever touch which pack so much weight into such a small size

UK’s economic vulnerability means safe haven gold essential protection

I’ve never played poker but I’m pretty sure the number one rule is not to reveal your cards to your opponents.

Yesterday the ONS possibly gave the EU one of the biggest reveals so far in Brexit negotiations. Revised figures from the statistics bureau showed the country’s stock of wealth hasfallen from a surplus of469 billion to a net deficit of 22 billionas reported by LBC.

This is down to FDI and fall in reserve foreign assets. In the first half of the year FDIfell from a 120 billion surplus in the first half of 2016 to a 25 billion deficit for the first half of this year.

With the UK totally losing its foreign assets, the EU (and the rest of the world) is aware that its safety net is no longer there. Not great timing, just as the government is trying to get throughthis crucial stage of Brexit negotiations.

Theamount that has been knocked off the UK’s wealth is the equivalent of 40% of EU contributions. The bank balance isn’t the only thing the UK has at best misunderstood or at worst been mislead over. Their trade is not as internationally diverse as Brexiteers might have led markets to believe.

Following the referendum result there was an increase in Britain’s exports. Many pointed to the numbers as a sign of confidence in the future of the UK, following the Brexit vote.

It turns out that much maligned goldwas to thank for this uptick. Without gold, the majority of the UK’s trade would be with the EU.

This is a reminder of how vulnerable we are to negotiations and reliant we are on the precious metal.

Gold’s saving role

As we can all recall, there was an air of uncertainty and panic surrounding the UK’s referendum last June. This prompted investors to diversify into gold bullion as a safe haven.

The increase in purchases of gold bars was so big that estimates of the country’s end-of-year GDP were pushed up. The majority of the gold sold in London eventually goes onto Switzerland, India and China. Therefore the export of gold is recorded as non-EU trade.

It is this that politicians, economists and the mainstream saw when they looked at export figures. An uptick in non-EU trade led them to concludethat Britain’s exports to the EU were growing which was a sign of confidence in the soon-to-be ex-EU Britain.

It was more of a sign of faith in the London Gold market over others in the UK. This past JulyBritain’s gold exports were greater thanany other (physical) export. More than 10% of the value of UK exports in July were accounted for by gold.

Gold, theultimate test for lack ofconfidence in the UK

Much of the gold didn’t even hang around in the UK. So little confidence did investors have. Reports show that some of that bullion bought in London was then moved out of the country to China, by investors, at the end of 2016.

These purchases and movement of gold was a double-edged sword, or contrasting sign of confidence and lack of confidence. It is an indication that foreign investors were still faithful to the hallmark that is the London Gold market, however have declining confidence in the United Kingdom.

Ed Conway on Sky News, explains the tricky picture this creates for those pushing confidence in the UK:

This raises doubts over one of the few Brexit claims which has yet to be challenged that Britain now exports far more outside the EU than inside.

The official trade figures produced by HM Revenue & Customs show that over the past five years the EU’s share of Britain’s exports has dropped to 46%.

But strip gold out of the statistics and the EU’s share is still 50%. Falling, yes, but not quite as fast as the official numbers might have you believe.

There are a few provis