Bri­tish in­vestors hold nerve on gold de­spite price fall

Kuwait Times - - BUSINESS -

LONDON: Savers who turned to gold to pre­serve cap­i­tal af­ter Bri­tain’s vote to leave the Euro­pean Union look to be keep­ing faith, even as prices re­treated, with some con­sid­er­ing fur­ther pur­chases. Gold priced in ster­ling has fallen around 4 per­cent from 3-1/2 year highs touched in July, but prices are still around 100 pounds ($120) above pre-Brexit lev­els. Bench­mark dol­lar-priced gold is some 8 per­cent down from a 2-year high of $1,374.91 an ounce hit on July 6.

Bri­tain’s bul­lion deal­ers re­ported higher sales over the past few weeks, as fears grew of a “hard Brexit” - a sce­nario that some fear could hin­der trade and con­strict for­eign in­vest­ment and de­value ster­ling fur­ther. “I didn’t know the gold price had dropped. My hus­band tells me that the cur­rent price isn’t far off what it was when we pur­chased, so no re­grets,” said Grace Hall, who de­posited part of her life sav­ings — 25,000 pounds-into gold at the end of June.

Deal­ers re­ported what they called an un­prece­dented rush for gold, much of it from first-time buy­ers, af­ter the Brexit vote as eq­ui­ties and ster­ling slid, spark­ing a search for tan­gi­ble as­sets that could by kept at home or in safety de­posit boxes and not nec­es­sar­ily in banks.

“We don’t have the cap­i­tal to buy any more (gold) but if an op­por­tu­nity presents it­self and we come into some money I cer­tainly wouldn’t dis­count it,” the 49-year old from York­shire said. Gov­ern­ment-owned bar and coin pro­ducer the Royal Mint re­ported a seven-fold in­crease in sales of 100-gram bars, around half the size of a credit card and cost­ing around $4,400, in the two weeks fol­low­ing the June 23 vote. “Our sales for Oc­to­ber are on track to be more than dou­ble the level in Septem­ber, and 50 per­cent higher than in June when we were ex­pe­ri­enc­ing the im­me­di­ate surge in de­mand around the Brexit vote,” said The Royal Mint’s di­rec­tor of bul­lion Chris Howard.

New ac­count open­ings jumped at the be­gin­ning of Oc­to­ber on the on­line gold trad­ing plat­form Bul­lionVault.com. Oct. 4 marked the heav­i­est trad­ing vol­umes at 9.2 mil­lion pounds ($11 mil­lion) since its record on June 24. The num­ber of first-time UK buy­ers on the site had risen by around 170 per­cent in June, com­pared to the pre­vi­ous 12-month daily av­er­age. The Pure Gold Com­pany, where Grace Hall bought and holds her gold coins, also recorded a 23 per­cent in­crease in de­mand from first time gold in­vestors in the first week of Oc­to­ber.

PER­SIS­TENT CON­CERN

“Bri­tish in­vestors ac­tive in phys­i­cal gold are clearly anx­ious about the wider fi­nan­cial out­look as Brexit un­folds, and ex­pect gold (in ster­ling) to con­tinue ris­ing,” Bul­lionvault head of re­search Adrian Ash said. Gen­er­ally, Bri­tish in­ter­est in gold has been luke­warm in modern times be­cause of the pound’s role as a global re­serve cur­rency, even when ster­ling was tested by crash­ing out of the Ex­change Rate Mech­a­nism (ERM) in 1992.

Bri­tain’s deal­ers saw a buy­ing surge in the ini­tial phases of the sub­prime crisis at the end of 2008 and dur­ing Europe’s debt crisis in 2012 and 2013. But in­ter­est this time is not dis­si­pat­ing as quickly, the deal­ers said.

The lat­est drop in prices en­cour­aged London-based prop­erty de­vel­oper An­drew to buy 30,000 pounds worth of bars and coins, adding to a 350,000 pounds pur­chase in July. He said, how­ever, that he would sell it back if “I came across a prop­erty op­por­tu­nity and I couldn’t raise the money quick enough.” — Reuters

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