Goldfinger — on the trade scales
The Office for National Statistics published trade statistics excluding precious metals. This is the first time the ONS have made this exclusion, because of the high volatility of such trades.
This article considers how excluding trade in precious metals affects UK trade statistics.
Always believe in the gold
National central banks may hold gold as reserves.
Non-monetary gold is gold bullion not owned by central banks. This type of gold makes up most of the commodity group of ‘unspecified goods’. The group includes other types of precious metals which people can trade.
Headline trade statistics include trade in non-monetary gold and other precious metals. This is to ensure international comparability. Guidance and standards come from the International Monetary Fund’s manual (BPM6).
Jonathan Athow (Deputy National Statistician) explains there are two principles.
1. Treated like other commodities
Sales of precious metals are like other commodities. To use Jonathan’s example, imagine someone in the UK sells gold to someone in France. Trade statistics record that gold sale as a British export and a French import.
2. Ownership, not location
Ownership matters for imports and exports. The trade is when the sale happens — not when items cross borders. In that example, the gold itself could be in Swiss vault and not move. It would still be a British export and French import, because the ownership changed.
This is important. London is a financial centre for worldwide trades in non-monetary gold. This trade can be large in value, impacting the size and direction of UK trade statistics.
Gold trades are neutral to our country’s GDP. Economic statistics consider the sale of gold as a negative investment. People may buy gold as a store of value, like stocks and shares. International trade statistics do not class stocks and shares as importable goods.
In January-March 2019, the UK had an estimated net import of precious metals of £10.9bn. In October-December 2019, that estimated balance became a net export of £12.4bn.
The golden rule
Liz Truss MP (International Trade Secretary) shared headline trade statistics on Twitter. The Secretary of State’s post highlighted a “5.0% increase [in exports] on 2018”.
What happens when we exclude trade in precious metals?
In current prices, estimated total exports excluding precious metals were £674bn in 2019. That is an estimated increase of 2.9% on the previous year.
Annual growth was at its lowest rate since 2016 — an increase of about 7.3% on the 2015 value. However, there was a estimated decrease in UK exports between 2014 and 2015.
A very large increase in precious metals trade gilded the headline export growth of 5%. There was an estimated £8bn of precious metal exports in December 2019.
For international comparability, headline statistics must include precious metal trades. Excluding precious metal provides a clearer view of underlying flows. In trade statistics, all that glitters is not gold.