Last week we saw the price of gold drop to below £1,000 per ounce, as the pound climbed to a stronger position following speculation about a delay to Brexit. So, what does this mean for gold investors?
Brexit has had a large effect on the economy and the gold price since the original referendum in June 2016. After the vote to leave the EU, we saw gold shoot up immediately as the pound dropped amid fears for the UK economy. Since then, we have continued up and down on a rollercoaster ride and seen back-and-forth talks about Brexit, yet no deal has been agreed.
However, some fears looked to have been settled about the impact Brexit may have on the UK economy after last week’s news that MPs will be able to vote against a ‘no-deal’ Brexit. The options we are left with include: holding a second referendum, leaving the EU with a deal, or even the total cancellation of Brexit altogether – and any of these are seen by many as decent prospects for the UK and its economy.
This news of a delay and future vote seems to have fuelled confidence and it was good news for the Pound last week as it made a five-month high gain against the US Dollar and a two-year high against the Euro. However, gold took a hit and the price dropped below £1,000 per ounce.
So, is this bad news for precious metal investors?
The Silver Lining?
Yes, the price may have dropped but there’s still a silver lining. We’ve had a great few months with gold strong, but what goes up must eventually come down right? And vice versa of course. Here’s why we would suggest gold investors shouldn’t worry:
It’s not all bad news! At the time of writing, Gold sits at £978 per ounce, which is up by over 5% over the past 6 months. Late September 2018 saw the price drop down to a low of £908 per ounce. Today we see that the Pound has dropped slightly since the end of last week – where will it go from here?
Also, let’s not forget the reasons why we hold gold. We own gold for one or more of the following reasons: to help diversify our investment portfolio, as a hedge against the declining value of paper money, or as insurance that gold will always have a cash value and will be there to sell in case of a rainy day. Who knows what may come in the future? As history tells us, our favourite precious metal will always hold value and will be there in times of need.
As for Brexit, we are seeing changes in the headlines occurring nearly every day. As the deadline approaches, we can only wait and see. Who knows how the Pound will look, and where the price of gold could be heading?
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.