I would refer readers to the following paragraph written mid-May in an article entitled: Britain Facing Brexit Bombshell. What Would Happen to Gold?. With some new opinion polls published over the weekend suggesting a strong move towards making the Brexit (for the UK to leave the EU) option in the forthcoming referendum on June 23rd reality, it might be seen as prescient! In trading today the pound sterling has dropped sharply against the US dollar and the gold price in sterling has risen to above £900 an ounce. The paragraph I’m quoting is below.
This website is largely about gold and precious metals. What would be the effects of a Brexit on the yellow metal? We think the impact could be strongly positive for gold. The yellow metal tends to thrive on economic and political uncertainty and there are potentially far reaching consequences of a Brexit decision, particularly within the EU itself. For UK holders a mini collapse of sterling as a result of a Brexit decision should it happen, would probably make moving some of one’s wealth into gold a very wise decision indeed. Gold is in effect financial insurance and if the economists and politicians predicting disaster for the UK economy if Brexit happens are correct and sterling plunges – it probably would in a knee-jerk reaction anyway – then a global gold price rise coupled with a fall in the domestic currency looks to make holding some gold a no-brainer for the UK investor in particular.
Despite the latest opinion polls, which have seen huge fluctuations, Brexit is still certainly not a foregone conclusion. Bookmakers odds for example still see the UK voting to remain in the EU, as do some other polls, but in the above paragraph we were looking at gold investment very much as insurance against the possibility of a leave vote – and if today’s movements in gold and sterling are a guide then gold investment would have been a very wise move back in mid-May!
It is also worth noting that our view then was that regardless of the UK referendum final decision, gold investment for the longer term would be a positive move in any case.
Re the latest Brexit fears I would commend readers to check out the following abridged version of an article today by Ross Norman – the CEO of London bullion company Sharps Pixley. Ross is a long-time observer of the precious metals markets and his views carry a lot of weight in the UK precious metals investment space. The full article is available for reading on the info.sharpspixley.com website. Click on the headline to go direct to the original article.
Whilst Sharps Pixley has never advocated taking a short term gold position for tactical wins, for the discerning investor with a long term strategic view, it authenticates the case for owning physical gold and for what it does best – and that is as a long term store of value and an effective means of wealth preservation.
The UK is not unique in seeing its currency weaken and physical gold is an easy way of hedging yourself and providing wealth protection for just such an eventuality.
CHART ABOVE – GOLD IN STERLING TERMS
Although some polls are suggesting the leavers are in the lead, the remain camp still very much has the betting odds in their favour (and crucially this is regarded as the best guide), which sees them likely to secure victory with an implied 64.5 pct probability of winning.
With just 10 days to go before the vote it looks likely that the rhetoric on both sides will scale the fear factor and the British pound is likely to weaken and correspondingly gold in sterling terms may be the winner.