13 September 2019
By Josh Saul – The Pietra Sussan Company
Few other substances on Earth have held the same sway over humankind’s development as gold. It’s been bought, bartered and traded with since almost the dawn of civilisation, and even today it remains a compelling choice for both seasoned investors and those new to trading.
Following the global economic crisis that first emerged in 2008, prices in gold have continued to ascend, in recognition of its relative security in comparison to other forms of capital. Whether your investment is in gold bullion, coinage, and trade commodities, or in mining companies actively discovering, refining and processing, gold is a firm investment decision that can hold you in strong stead over the long term.
Yet in today’s era of renewed political uncertainty, most recently stirred by the United Kingdom’s inability to agree how it will leave the EU, which is affecting all areas of our economy, does gold still stand tall as one of the wisest areas for investment? Historical precedent and the latest expert advice suggests to us that it does.
All That Glitters
The United Kingdom’s vote to exit from the European Union in 2016 saw a degree of unease filter through the world’s stock markets and sent sterling sharply down, while interest in the gold market soared. It took some time, but over the next two years, sterling recovered and gold lost some of its gains. This year though, the pound has been falling while gold has recovered and sprinted well beyond the 2016 level.
While uncertain economic times, especially those caused by political events, often present challenges to the financial world, they are renowned as being excellent conditions for gold. The big question today is whether gold’s price will continue rising in the face of the UK’s internal challenges as well as the global repercussions of a trade war between China and the US.
Many governments appear to think buying gold is a good idea. In the first half of 2019, central banks bought 374 tonnes of gold, the highest level of demand since central banks became net purchasers in 2010. Driven by Poland, Russia and China, the geopolitical and economic situation is spurring these governments to stock up on safe-haven gold.
Meanwhile, the city has been largely bullish on gold since the end of 2018 and as the price has continued to rise, their forecasts are rising with it. Head of Metal Research at Bank of America Merrill Lynch, Michael Widmer, believes gold could surge to $2,000 over the next two years as investors seek a safe asset.
The Cost of Uncertainty
In the wake of Brexit there will be changes to our economy, and with change, of course, comes risk. Gold is the stable commodity best known for and utilised to diversify risk, offering calmness during periods of fluctuation. Political and economic events such as Brexit foster an atmosphere of uncertainty that further boosts demand for a range of gold investments including gold coins and bars, continuing to nudge the gold market price upwards.
If you’re new to precious metal trading, don’t feel like you’re restricted from participating in this opportunity without substantial financial backing. Our advisors are able to discuss with you, impartially, the advantages that you hope to gain through investing in gold, as well as defining the budget and potential returns that best fit your circumstances. What that means is that you’ve full control over your level of investment, affording you extra peace of mind.
A Shining Future
Even as the effects of Brexit become clearer, other factors will continue to define the dynamics of the coming years. These range from the question mark hanging over other European Union member states that may opt to hold a referendum of their own, through to repercussions of the ongoing trade war.
The current Brexit debacle is a prime buying opportunity for gold. If the UK is forced to leave without a deal, sterling will likely decline and holding gold is an effective currency hedge. There may also be substantial economic repercussions, from stock market fluctuations to price rises and corporate stagnation which will affect other assets. Again gold is a useful hedge against other asset declines.
Even if there is a resolution to the Brexit conundrum and a deal is reached, the uncertainty that has already been created. On a more global level, the uncertainty around trade and international economics that is fuelling recession concerns is driving this precious metal’s price up.
All these factors make the climate favourable for gold investment as a long-term interest, with huge potential going forward. Invest today, and you can expect security and a stake in the ultimate ‘safe-haven’ commodity, and a source of stability in what looks to be several more months of twists and turns.
