Gold demand up as Brexit arguments move to next phase

Jonathan Boyd
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Gold demand up as Brexit arguments move to next phase

As the UK government lost three votes and was found in contempt on Brexit related issues even before the main five-day debate started in the UK Parliament on Tuesday, demand for gold surged against the daily average seen through 2018 so far, according to figures provided by The Pure Gold Company.

The company, which offers a curated investment service focused on gold, said it saw a 398% uplift in investors buying physical gold over the past day.

CEO Josh Saul said: “We had a 79% increase in first time investors purchasing physical gold yesterday, with many unsure where the UK will be – both politically and financially – in a few months from now. Uncertainty is at an all-time high with some clients predicting a ‘No Deal Brexit’, others predicting another referendum, and a growing number of people citing the possibility of a removal of the prime minister from office. Some believe this would be catastrophic for confidence especially given the potential candidates who could replace her.”

“38% of clients who invested in gold yesterday also purchased gold when the outcome of the Brexit referendum was announced in 2016, when sterling plummeted and gold jumped more than 23% in just a few hours. Yesterday, sterling briefly fell to a 17-month low after the contempt of Parliament vote, whilst the gold price increased by almost 1%. There are many factors affecting the gold price, including a weakening currency, which can be a catalyst for a rise in the gold price.”

“Our clients are not investing in physical gold to make money or grow their portfolio. It is more about wealth protection and a hedge against uncertainty, which increases the safe-haven appeal of gold. Physical gold essentially sits outside the banking system and people feel shielded from the decay that appears to be spreading across markets. Investors hope their gold will not surge in value as this will likely indicate that their equity portfolios are losing value.”

“67% of clients who purchased gold yesterday were financial professionals who work in banking, accountancy and the legal profession. They are unsure how the UK will be governed in 2019 and who will be leading us. The continuing trade war in China and USA and the stark warning from the Bank of England last week regarding a possible recession leads our savvy investors to think things are likely to get worse before they get better.”

“Since the beginning of November, we have seen a 278% increase in people removing exposure to equities within their pension and SIPP (Self-invested personal pension) to purchase gold within the same vehicle. Many investors close to retirement cannot afford to endure another month like October where equity markets fell by 5%. Gold increased by almost the same amount which is why people who used gold as a hedge are in a neutral position, which for many is the objective of investing in gold.”

Jonathan Boyd
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Jonathan Boyd

Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope.

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