Yahoo Finance: Spooked investors rush to gold as markets wobble on election call

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The Pure Gold Company

19/04/2017

Further coverage on Yahoo Finance of the Pure Gold Company’s boom in investment gold transactions following the surprise announcement of a general election. 

Anxious investors are seeking refuge in gold as the stock market wobbles on the back of Theresa May’s snap general election call.

As the FTSE 100 fell 180 points in the day, wiping about £46 billion off the value of listed companies, gold prices rose on increased demand.

Investment firm The Pure Gold Company witnessed a 119% increase in customers buying physical gold in the aftermath of May’s election announcement.

Tellingly, two-thirds of those buyers previously purchased gold in June last year, just before the Brexit vote, and many see the forthcoming election outcome as equally unpredictable.

“We saw a textbook inverse relationship between sterling and gold yesterday, with a spike in the gold price before the announcement and then a fall once sterling strengthened on the news,” said Josh Saul, CEO of The Pure Gold Company.

“Our clients were looking for a good price to buy gold, and we saw our largest purchase when the gold price hit £1,007 per oz, with one banking client buying £1.3 million of 1oz Britannia coins.”

Global markets have been spooked by increasing political tensions. The ongoing uncertainty in Europe over the UK’s role, the Trump US election victory and his relationship with Russia, North Korea and the Syrian war have all created major uncertainty.

“We’ve had many clients removing exposure to equities as they fear the worst-case scenario between North Korea and US,” added Saul.

“They believe that both leaders are inclined to fight, which adds to the unpredictability of the global political and economic environment, and this lends itself to gold sales as a relatively secure investment or a form of portfolio insurance.”

But while the FTSE slumped – although it has stabilised today – currency markets have roared their approval for a snap UK election, with the pound enjoying strong gains against the dollar and the euro.

The pound closed up 2.4% on the day at $1.2904 against the US dollar, its highest level since last October.

“The fall in the stock market is not a negative response to the UK election per se, rather it is a knock on effect of a surging pound, combined with price falls in some key commodity markets, all of which has taken its toll on the heavyweights of the FTSE 100 index,” said Laith Khalaf, senior analyst at investment firm Hargreaves Lansdown.

“The EU referendum provides a clear blueprint for why investors shouldn’t shape their portfolios according to proceedings at the ballot box. Not only was the result of the vote a surprise, the effects on financial markets were too, so investors would be best served by keeping politics out of their portfolios.”

Source: Yahoo Finance

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“We’ve had many clients removing exposure to equities as they fear the worst-case scenario between North Korea and US,” added Saul.

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