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Analysts predict sharp jump in gold value if UK opts for Brexit

Monday, June 20, 2016

Analysts are predicting a sharp rise in the price of gold if Britain votes to leave the European Union this week.

Speculation that the UK will vote for Brexit in the referendum on Thursday (June 23) has already seen the value of the pound tumble and gold is, of course, considered the safe haven for cash in turbulent times.

James Steel, of HSBC, told Business Insider that a vote to leave could see the price of gold rally by another 10 per cent.

He said: “The drive higher may be more pronounced if there were to be broader concerns about the future direction of the EU after the vote. Gold could also benefit from the reluctance of investors to move into the GBP or even the EUR.

“As a risk-off asset, gold would likely rally in the event of a leave vote. We anticipate a sizable safe haven bid in gold in this event.”

HSBC points out that gold is “often one of the few liquid perceived safe haven assets”.

The bank is not alone in warning of issues on the market in the event of an out vote. Both Morgan Stanley and Bernstein Research have also highlighted the risks to the UK’s financial sector if the country chooses Brexit.

However, HSBC does not forecast as sharp fall in the value of gold, which has enjoyed a strong rally so far this year, if the UK opts to remain within the EU. It said that the precious metal is “well placed to withstand any repercussions” of a remain vote.

Mr Steel added: “The risk to gold of a vote to remain in the EU would be asymmetricWhile a vote to leave the EU would likely result in a rally, we do not think a vote to remain in the EU would trigger a major sell-off.”

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