Monday, June 27, 2016
The price of gold is continuing to climb as the world markets react to the shockwaves caused by the UK’s vote to leave the European Union.
The value of the precious metal, which has been rallying for the past six months, has rocketed as investors seek a safe haven for their cash. The gold price stood at £987.57 per troy ounce at 07:45 today (Monday 27), leaping from £836.39 per troy ounce at 23:00 on Thursday before the results of the referendum were announced.
The gold price has jumped as concerns for the economy in the wake of the Brexit vote saw the value of the pound slump to its lowest levels in more than 30 years. The tremors were felt around the world as share prices tumbled as investors sought a safe haven for their cash.
According to Bloomberg, analysts expect the price of gold to climb even higher by the end of the year and reach levels not seen since August 2013.
In a report, Goldman Sachs analysts Max Layton and Jeffrey Currie said: “The ultimate trajectory will depend on the intensity and duration of the uncertainty shock created by the leave outcome and any potential revisions to the US growth outlook, both of which remain highly fluid in the current context.”
Indian analyst Madhavi Mehta, of Kotak Commodity Services in Mumbai, added that the uncertainty that remains in the market means “safe haven assets like gold and yen may remain supported”.
British Chancellor George Osborne tried to calm the markets in a statement this morning, suggesting there would not be an emergency Budget as an immediate reaction to the Brexit vote. Prior to the referendum, he had indicated that one would be needed.
However, in today’s statement, Mr Osborne said that although the UK economy would require an adjustment, Britain could face the uncertain future “from a position of strength”.
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 asymmetric. While 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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Monday, June 13, 2016
Major investors are putting their money into gold amid continued concerns about both the global economy and the uncertain political outlook.
Famed US investors George Soros and Stanley Druckenmiller are among those currently putting money into the precious metal thanks to its reputation as a safe haven in turbulent times. It’s understood that Mr Soros has been investing both in physical gold and gold mining shares; Mr Druckenmiller has spoken publicly about the safety of gold in comparison to stocks because of his concerns about the Chinese economy and the US Federal Reserve’s monetary policies.
2016 is a major year on the political front and that is increasing the uncertainty on the markets. As well as the UK referendum on membership of the EU and the US presidential election later in the year, there are a number of other issues that are making the precious metal attractive to investors.
Dennis Gartman, who publishes the Gartman Letter, told CNBC: “You have a Spanish election coming at you in a week and a half and that is terribly confusing. It looks like the left is going to win. You have rising nationalism in France. You have the strike in France. You have one thing after another.”
The possibility that the UK may leave the EU is making investors consider whether other nations could follow suit and the potential effects that would have on the value of the euro.
Meanwhile, Jim Steel, chief commodities analyst at HSBC, said that the steadily rising price of gold this year is due to investors, rather than major physical-gold-buying nations such as China and India increasing their holdings.
He said: "Basically, the rally has been entirely investment led.
"It's kind of like having a table with a leg missing. It's heavily investment led. I'd feel better with a longer-term rally if we had a physical component. It does present upside roadblocks further up.”
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Monday, June 6, 2016
Gold is forecast to have a strong week on the markets following the publication of weak jobs data in the US, which makes it less likely that the US Federal Reserve will increase interest rates.
The precious metal jumped in value by more than two per cent on Friday following a weakening last week on the back of expectations that the Fed was on course to put up the cost of borrowing. But the latest US Labor Department figures for non-farm jobs showed the lowest number of jobs in five years were created during May and appear to have put paid to most analysts’ predictions of a hike in rates.
The data was well down on expectations and could spell a further resurgence in gold prices over the week ahead, following a slump as investors confidently expected the Fed to raise rates. Gold was valued at £857.31 per troy ounce at 20.45 on Friday (3 June) and this morning (Monday 6 June), it was valued at £859.63 per troy ounce at 08:00.
ABN Amro analyst Georgette Boele told Reuters: “The sharp drop in non-farm payrolls is negative for the dollar and positive for gold. Expectations for a rate hike soon have clearly diminished... Precious metals prices will fly higher.”
After the release of the jobs figures, both US and European shares fell, along with the US dollar, oil and bond yields. Gold tends to rise in such circumstances because it is considered a safe haven for investors during turbulent economic times.
James Steel, chief metals analyst for HSBC Securities in New York, said: “The climate for gold to go higher ... was certainly set because this pretty sharp drop in bond yields, along with the pull-back in the US dollar and declining equities created a good combination for the gold market to go higher.”
Silver, platinum and palladium also rose on the news.