Struggling to make financial sense out of this week’s political upheaval? One thing at least is certain: in uncertain times, the smart money is on gold.
When Theresa May cancelled Parliament’s ‘meaningful vote’ on her Brexit deal, supposed to take place on the evening of December 11, the pound plummeted to 20-month lows.
It fell 1.6% against the euro, to €1.1007, and 1.57 per cent against the dollar, hitting $1.2526. And sterling could fall even lower: Bloomberg.com have predicted a more than a 50 per cent chance that it will dive as far down as $1.2370. But the UK gold price per ounce streaked ahead at the news of the cancelled vote, hitting £986 per ounce. Although it’s fallen since, it’s still performing better than the pound, which has struggled ever since the referendum vote. Between 23 and 27 June 2016, sterling depreciated by 11% against the US dollar and 8% against the euro. It’s still stuck at around 10% below its pre-referendum value.
And Brexit, of course, is just one of many factors affecting the markets. As Dr Thomas Sampson of the London School of Economics points out in his blog, Brexit alone can’t be blamed for all the uncertainty of recent years. With increasing political instability in Europe and Trump’s whims over the Atlantic, there’s a lot of it about.
It’s unlikely that this uncertainty will lift in the near future. But whatever happens, gold is a safer bet than sterling.
“Clients expect all scenarios to be devastating for the pound,” says Josh Saul, CEO of the Pure Gold Company, which saw a 723% increase in customers buying gold bars and coins after May halted the Brexit deal vote. He also notes that people in the know are keen on gold, with a 187% increase in the number of professionals working in the banking sector who purchased gold that day – fuelling concerns that a recession is looming.
Inflation is also a concern at times of crisis: when it rises, your cash is worthless. Again, it’s easy to see the trend since the 2016 referendum. In June 2016, the Consumer Price Index (CPI) inflation rate was 0.4% in June 2016. In October 2018, it was 2.2%.
But gold, of course, isn’t affected by inflation, making it the perfect choice for those who want to make sure their investments hold value.
Steady as you go
Gold traditionally holds its price in times of turbulence on the stock markets. In 2008, following the financial crisis, investors turned to gold as a safe haven that offers reliable returns and lower risk than the stock market.
Between November 30, 2007, and June 1, 2009 – days of deep recession – the S&P 500 Index crashed by 36%. But the price of gold didn’t just hold – it rose by 25%.
As Motley Fool says: “Essentially when stock prices are going south, gold is likely to be appreciating in value as investors search out safe havens for their cash.”
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Friend not fad
When the political world is in turmoil, it’s hard to escape from flashy ads claiming impossible returns for this week’s financial fad.
Cryptocurrencies, perhaps, or something that you don’t quite get but has the word ‘blockchain’ in it. But while it’s always tempting to be part of the next big thing, bear in mind that by the time you’ve heard about this incredible innovation which will change the way you invest forever, the time to make money has passed – if it was ever there in the first place.
There’s a reason why people have been investing in gold for hundreds of years. It’s real. It’s a tangible, trusted asset. And it’s safe with Goldex. Any gold you buy through Goldex is LBMA-approved, fully insured, and safe from creditors and insolvency.
Currencies rise and fall, political leaders come and go – but gold is an investment you can trust.
Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this it does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.