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British Buy Gold in Wake of Election Uncertainty

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What did Brits do before the recent elections in the UK?

They bought gold.

According to the Financial Times, gold sales soared 87% as uncertainty kicked in on election day earlier this month. As prospects of a hung Parliament loomed, “panic-stricken” investors converted their  sterling into gold.

The election results were a disaster for the majority Conservative party. It ended up with a net loss of 13 seats with 42.4% of the vote. Labour made a net gain of 30 seats with a 40.0% vote. The results cast a cloud over the complex task of making Brexit a reality.

There was a similar rush into gold in the UK leading up to and after the Brexit vote last year. One gold company CEO reported some people converted as much as 40 to 50% of their net worth into physical gold in the weeks after the UK voted to leave the EU.

Pure Gold Company CEO Josh Saul said the scene was similar on election day June 8. He stayed open until 10 p.m. taking orders.

Brexit worried people last year and the prospect of a hung parliament is perceived to weaken our position on trade agreements. Our clients feel that this could considerably affect our economy and it’s this that is driving them to hedge their wealth, including their retirement, with a risk adverse asset class such as physical gold.”

Saul said there was a 63% increase in people removing exposure to equities within their pension in order to purchase physical gold in the same vehicle.

Adrian Ash, director of research at BullionVault, called gold a “must have” in the current political environment in the UK.

While it can’t defend savers and investors against higher taxes, worsening inflation or economic recession, gold tends to do well when other assets do badly. The clouded outlook for shares, gilts and particularly the pound make gold a must-have form of investment insurance as the reality of this hung parliament bites.”

The surge in gold sales in the UK comes as no surprise. Political uncertainty and geopolitical tensions around the world tend to set people on edge and drive them to seek the safe-haven gold traditionally offers. An abundance of caution has been pushing gold higher this year, at least prior to the most recent Federal Reserve interest rate boost and its suddenly hawkish rhetoric.

But despite what the Fed might say or do, the fundamental uncertainty in the world has not changed in the last two weeks – not in the UK, nor in the rest of the world.  As we’ve pointed out in recent months, uncertainty seems to be the new norm. Next week, there will be a whole new set of political issues, surprise events, and rising tensions to make us uneasy.

We shouldn’t wait for an unsettling event to buy gold. When things go south, it’s too late. If we believe gold is a safe haven, we should have it in hand before the storm. As the Boy Scouts say, “Be prepared.” In today’s political and economic climate, it seems wise to always proceed with some level of caution.

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