British investors hold nerve on gold despite price fall

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