The Pure Gold Company saw a 723% increase in people purchasing physical gold bars and coins on Monday compared to the daily average for 2018, citing concerns of a market crash after Theresa May’s decision to abort the vote for her Brexit deal on Tuesday. The news sent UK-exposed stocks falling while the sterling gold price rose after the pound weakened.
CEO Josh Saul said: “The buying behaviour and level of panic were reminiscent of the hours before the Brexit referendum. The gold price shot up over 23% minutes after the decision was announced. I think the difference here is that back then most people incorrectly expected that the referendum would not result in the UK leaving the EU. Now, they expect the unexpected. Monday’s enquires largely resulted in fast-paced order taking from clients panicked and fearful of either a no-deal Brexit, no Brexit (leading to riots and political unrest) or a vote of no confidence in Theresa May resulting in a new government or new leader or both. Clients expect all scenarios to be devastating for the pound.
“We saw a 187% increase in the number of professionals working in the banking sector purchasing gold Monday, citing concerns that a recession is becoming more and more likely. Over 73% of these clients have removed exposure to equities to purchase gold. These clients are not investing in gold to obtain growth but as a hedge or financial protection from increasing equity volatility and counterparty risk. Many of our clients hope that their gold doesn’t keep rising in value as this likely means their equity portfolio will fall. Global equity markets have been very volatile over the last few weeks, while dollar-denominated gold is near five-month highs. Gold also tends to strengthen when local currency weakens as it takes more currency to purchase the same ounce of gold.
“69% of clients investing in gold on Monday were first time investors worried about the safety of their money in banks. We are seeing a growing number of investors concerned about the future political leadership and bank counter-party risk. There is a general concern that if inflation rises and returns on savings remain low, any wealth left in bank accounts will be eroded. Gold’s safe-haven status is growing as other investments look increasingly risky, from equity to bonds and property. UK buyers are exempt from capital gains tax if they purchase UK gold coins, and many of our clients have liquidated cash and equity ISA’s to take refuge in tax-free gold.
“The majority of our clients are buying gold for the long term but there has been a 36% uptick in clients buying gold to hold for the short term and take advantage of market volatility. Other buyers have sold property and converted it to gold rather than have a large sum of cash in a bank account. Some of them are waiting for a better buying opportunity as they expect property prices to fall in the near future. While they wait – they seek protection in something they know will be there in the morning.”