Brexit the vote for Britain to exit the European Union on June 23rd, 2016 led to stocks plummeting on the London Stock Exchange and the pound sterling falling on the floating exchange. This news led to many Britons’ concern for their financial future and that of their children and grandchildren.
It is an understandable fear when your financial portfolio is significantly devalued within days of such a life-changing national decision. The national financial effects of Brexit were immediate and were felt temporarily on a global scale.
As in days gone by, many people convert their cash assets into tangible precious metal such as gold or silver for financial security. In the 19th century during the time of the gold standard, most countries fixed their currencies against a particular weight of gold. So gold has played a significant role in the trade and exchange markets for centuries. Bullion coins – a coin struck from precious metal – circulated as currency throughout the world until World War I. Today they are kept as an investment and not used in day-to-day commerce.
Other countries, such as Germany which in the past has experienced hyperinflation has used gold to protect their wealth against currency fluctuations.
The interest and high demand for purchasing gold, especially from first-time buyers is unprecedented. Some investors are converting as much as 50% of their net worth to gold.
The surge in gold investments has adversely affected property markets. Projects are at a standstill due to the panic over Brexit and buying a property appears to be an unwise investment. Typically, British interest in gold is moderate in comparison to that of similar nations mostly due to the pound sterling’s role as a global reserve currency.
Britain is currently ranked as the 15th biggest consumer of gold bars and coins.
Brexit is not the first time the British public has turned to gold for financial security. Gold dealers also saw a surge during the subprime crisis in 2008 as well as throughout the European debt crisis in 2012 and 2013.
The current interest in gold does not appear to be dissipating. Gold has become a financial safe haven for many Britons because it is a tangible asset that cannot be taken away.