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Britons are buying gold to protect themselves from the uncertain outcome of Brexit. According to Chris Howard of the Royal Mint the demand for coins and bars has increased sharply recently. For example, 73% more gold has already been sold this month than in the same period last year. At the end of last year, there was also an increase in interest in buy gold which can be attributed partly to Brexit and partly to the turmoil in the financial markets.
The Royal Mint produces gold and silver coins for the private market. With investment currencies such as the Britannia and the Queens Beast the Mint offers an alternative to the savings account. Chris Howard, director of the precious metals department at the British mint, is anticipating a further rise in demand for gold. In an interview with Bloomberg he says increasing uncertainty among investors about Brexit is causing a flight to safe havens. "By expanding exposure to gold and other precious metals, they can hedge the risk of market volatility."
The British parliament will vote on Theresa May's Brexit agreement on Tuesday. It is expected that she will not win a majority, which means that we are once again facing a period of uncertainty. If parliament votes against, it must come up with an alternative plan for Britain's departure from the EU within three days.
In 2016, Brexit also set the gold market in motion. When the majority of the population voted in a referendum to leave the European Union, the Gold price up by 10%. At the same time, the British pound plunged, from which the currency has not recovered since. The precious metal thus proved its added value as a hedge against volatility and currency fluctuations.
In 2017 and 2018, the British mint saw demand for gold fall. Due to the fall in the price of gold and a stabilisation of the British pound, there was less interest in precious metals. In the financial year ending March 2018, the mint's turnover fell by 28% to £227 million. With stock market volatility increasing and Brexit approaching, demand is picking up again.
Brexit and stock market volatility propels gold to highest level in months (Source: Bloomberg)
