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Why Is Brexit Not Attracting More Gold Investors?

In April 2020, came under new management, articles published before this time, such as the below, may not reflect the views or opinions of the current team.

The Brexit crisis in the UK was expected to draw in more gold investors looking to hedge their wealth. So far, there seems to be a low appetite for gold amongst UK investors which goes against expectations.

The rest of Europe however is building its gold holdings. Germany for one, has been buying a lot of gold. Unlike most countries, not all of Germany’s gold is ending up in the country’s Central bank vaults. A lot of private citizens in Germany have been buying gold for themselves.

The Brexit debacle is the biggest defeat that a sitting government has suffered in the history of the UK. It has been described as a sideshow by the developed world. Europe has had a lot of crises over the years and investors might be expecting some last-minute miracle resolution. Most people expected the defeat to happen, but they may need to see the unexpected happen before they move on to gold.

Gold isn’t benefitting from safe-haven demand as it should, however the global monetary policy supports the gold market so as long as central banks find it difficult to normalize the monetary policy, gold will always be at an advantage. Gold could attract attention after the US Federal Reserve monetary policy meetings. Things might look up if there’s talk of the US central bank halting it’s tightening cycle.

Overall, the sentiment towards gold investment went up in March as prices dropped. Interest rallied by a third from the country’s weakest level in over ten years. This despite the Brexit crisis. Judging by the apparent apathy by investors, it would seem that Brexit is regarded as more of a political crisis than an economical one. This of course is a fallacy that many UK investors have yet to understand.

Gold as always is the most reliable hedge in a crisis. It has gone up in 8 of the last 10 years whilst the FTSE All Share has lost value on its return even during the 5 years that equities cost investors over 10%. So far, the shenanigans in Westminster have left investors unmoved. If there was any growing fear or panic over what Brexit could do to the nation’s savings, the UK would be demanding more gold to invest in. However this does not seem to be the case.

Gold prices retreated hard for UK investors retreating by 2.7% in February – March to an average of £988/oz. This was, however the cheapest it has been since December. It fell once more by 1.5% U.S Dollars to an average of $1,300 and 1.0% in Euro terms to €1151 per ounce.

This shows the weak demand for gold investing in the backdrop of Brexit. The lower prices and the Trump era posturing have brought out strong private hinges for demand in Western markets. However, interest in the UK failed to bounce as hard as the interest in the Eurozone.

Silver also fell hard in March, falling 4.3% from its 8-month average high of £11.63 per ounce.


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