Gold Jumps Most Since GFC on Brexit

Posted | 27/06/2016 / Views | 4262
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On the news of the Brexit gold was the best performing asset in the world, jumping 7.9% in USD spot terms and surpassing the other safe havens of US Treasuries and the yen.  It was the biggest jump since the GFC.  The news was even stronger in Australia with it surging nearly 12% before settling down a bit on a rebound of the AUD.

We reported last Monday that futures contracts held by managed money (hedge funds etc) hit an all time high for gold and held near all time highs in silver.  Saturday morning’s COT report showed that just 2 days before the Brexit, that record was surpassed again, seeing these big investment speculators reap big profits on their gold bets.

But reading any one of the myriad of articles over the weekend and you can’t but conclude that there are more gains to come as the risk of financial and political contagion looms large.  Indeed the normally gold-conservative Bloomberg held a poll of analysts and traders from New York to London on Friday and the median forecast for gold was another 7.7% gain to $1,424.  Note this is assuming no financial or political catastrophic event takes place, something that can’t necessarily be assumed with any confidence for some time.  

It’s worth pointing out again that this is a USD spot price prediction.  With the Aussie sitting at 74.3c at the time of writing and numerous analysts over the weekend talking of Australian trade being the loser in this vote, one would have trouble establishing a view that would see the AUD hold at this level.  Indeed if it doesn’t drop organically you could well expect the RBA to make sure of it at their next meeting.  At the 60c and 50c many analysts are predicting that translates to $2,373 and $2,848 gold in Aussie dollars.

To put the gold gains into context, here is what sharemarkets did on Friday: US down 3.4%, our ASX down 3.2%, Nikkei down 7.9%, U.K. initially down 8% before closing down 3.2%, Germany down 6.8%, Spain sank 12.4%(ytd down 18.4%!), Italy as bad at 11.8%, France down 8.0% (ytd down 11.4%), Netherlands down 5.7%, 6.4% in Belgium%, 7.0% in Portugal, 13.4% in Greece and 7.0% in Austria.

And as a final reminder, gold went UP 7.9%....  However…

Gold hit $1900 in 2011 and has been in a bear market to the end of 2015.  As we reported Friday morning (before the result) 2016 is seeing the beginning of what looks like the next bull market.  Whilst $1327 (as this is written) is a nice jump on the start of the year, up 25% ytd, it still looks like this is just the beginning when you look at the charts.  Likewise silver hit $48 in 2011, is now $17.80 after similar gains to gold on Friday, and is up 29% for the year.  Brexit just gave them a boost….