The value of the British Pound Sterling and the Euro are dropping sharply after the United Kingdom voted to drop the EU. Almost immediately, the value of gold and silver began to rise sharply as consumer confidence took a major blow as the UK exited the EU.
The sharp increase in value is likely due to investors flocking to “safe-haven” precious metals in the wake of the uncertainty caused by Great Britain’s exit from the European Union.
“Global currency markets are in an uproar”, according to investment newsgroup Kitco. “With the British Pound falling to a three-decade low, the Euro also continuing to drop in value, and global stock prices remaining as volatile as ever, gold, silver, and other precious metal commodities represent a safe alternative for the smart investor.”
Why are gold and silver prices rising so sharply in the wake of the Brexit vote?
Typically, gold and silver has historically been seen as a hedge against the volatility of an otherwise, unpredictable financial market. When the world is in turmoil–gold, silver, and other precious metals have been proven again and again to be a sound investment. It is a limited commodity that has a myriad of applications, from jewelry to electronics. Additionally, gold and other precious metals do not suffer from the same degree of volatility that other investments are prone to experience, and the rate at which they can fluctuate in value is far more predictable. Even when precious metals drop in value, within a few years, they will reclaim their prior value and often attain even higher prices.
According to Bloomberg, the surge in gold and other precious metals is the most dramatic since the apex of the 2008 global financial crisis. When the US housing market burst, gold became increasingly more attractive to investors that were looking to stabilize their shaky portfolios.
Additionally, the British Royal Mint also issued a written statement recently that stated it has experienced a significant spike in gold and other precious metal purchases in the wake of “Brexit”. At its peak, their online bullion trading system showed a 550 percent increase in traffic since exiting the European Union. Chris Howard, the director of the Royal Mint, has stated, “we can expect gold and silver prices to continue to rise in the wake of Brexit“.
While analysts are uncertain, at this stage, what impact the results of the European Referendum and the upcoming U.S. presidential elections will have on the precious metals market in the immediate future – it is safe to surmise that gold, silver, and platinum will continue to represent some of the safest investments for investors looking to minimize risk and protect themselves against out of control inflation and other financial meltdowns.