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‘Brexit’ fuels demand for gold

Topics [ gold market invest in gold gold bullion prices ]

NEWS

 

‘Brexit’ is shorthand for the possibility of a British exit from the European Union following a UK referendum on 23 June 2016.

Extremely close, the most recent opinion polls show the possibility of the Brexit camp coming from behind to snatch what was until recently thought to be an unlikely victory.

With worries that the 28-member EU could consequently begin to unravel, equity markets are gripped by uncertainty. In the past four days, the UK’s FTSE100 stock index has recorded losses of £100 billion.

Fuelled by fears for the British economy, some investors are turning to gold in an effort to protect their wealth. One major gold dealer in the UK has reported it is already experiencing increased sales, and is forecasting a huge rush for gold if the leave campaign is successful.

Turmoil in Europe, like the earlier possibility of Greece’s exit (Grexit), is likely to be contagious. Being an economic powerhouse, the impact of a British exit will have far greater ramifications than Greece’s prior exit threat. Among global equity markets turning sharply lower on Tuesday, the ASX lost over 2% as nervous investors dumped shares for less risky bonds and gold.

With the rhetoric heating up between the pro and anti-European campaigners in Britain this week, experts are broadly in agreement that the price of gold will climb further. Should voters confirm a Brexit in eight days time, the possibility of further slides in equities and declining world trade would only further strengthen its safe haven appeal.

If, on the other hand, those who wish to stay in the EU, led by Prime Minister David Cameron, are successful, plenty of risk factors with potential to damage world financial markets remain.

Along with other risk factors including worries about the underlying strength of China’s economy and the possibility of a Trump presidency, the allure of gold only gets brighter.

Brexit

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