Dear Readers 

With the General Election looming, how will this affect the price of Gold?  The polls seem to suggest that the most likely outcome will be no party winning an overall majority, much like the previous General Election.  However, unlike the last General Election, the smaller party which could make up the number of seats needed for a majority in any Coalition – or Kingmaker, as it is called in political terms, is very much open to question this time around.
 
Will it be a smaller far left party? Will it be the Scottish National Party? Will we see a Lib Dem/Conservative or a UKIP/Conservative alliance? Or even staggeringly a UKIP/Labour alliance?  As strange as this last diametrically opposed option seems, Farage has said he will make a deal with either party to ensure the British Public get a referendum on EU membership.
 
The overall point is however that all the above scenarios spell one word – volatility. Laura Suter, editor, Fund Strategy states that: “What seems certain is that until the results become clearer the UK markets are in for a rockier ride, with volatility likely to rise.”

 
And volatility in the markets means some advise moving one’s portfolio into a position that protects from short to mid-term downward risk. And that is good news for the price of Gold and Silver.
 
As Lee Robertson, chief executive, Investment Quorum explains: “After a six-year bull market where we have seen the FTSE 100 finally break through the magical 7,000 barrier and a meaningful rise in the FTSE 250 and Small Cap Indices…we might be getting close to the point when protecting your portfolio from downside risk, and volatility, might be a prudent decision. Particularly as we head towards an unpredictable general election result, a currency that is likely to experience further volatility in the election run up, and a market that could easily give up some of its recent return. 

 

Therefore protecting your portfolio from any downside risk, or volatility, might be a wise and prudent decision going forward. There are a number of  strategies that an investor could implement, such as having exposure to a long-short fund, or an asset class that is uncorrelated to UK equities and the market. Also investors could consider…gold bullion, the short-dated UK gilt market, or a higher weighing towards cash.”
 
Robertson concludes however that the ensuing volatility during the formation and early term of a coalition government could be even more volatile than expected. Gold and Silver Bullion would therefore “give wider portfolio diversification and some defensive qualities against a brutal correction from the UK equity market.”   

 
I thought it might be helpful to see what happened to the Gold Price leading up to and after the last General Election and the months that followed in the forming of a Coalition Government.  The Election point was in May 2010:
 
 
Now a caveat needs to be inserted here that there are always several geo-political and financial pressure points affecting the price of both GLD and SLV upon which the price of Physical is currently based; some common to both metals and some unique to each. However, I’ll let the figures speak for themselves. And bear in mind that all the fundamentals feeding the demand for Physical Precious metals have not decreased since 2010 but increased – more Quantitative Easing, an almost exponential rise in the turmoil in the oil rich Arab crescent and a rise in demand for Physical from China, being the most newsworthy of late.
 
But if Cameron wins – some argue – there won’t be a full EU referendum, just a negotiated change in the UK’s EU membership. But as of today, this claim is now factually incorrect and cannot be instigated.  As of today, EU Commission President Jean-Claude Juncker has just announced that he has “ruled out any treaty negotiations on Britain’s relationship with Europe whilst he remains president of the European Commission. In a blow to David Cameron, this would leave the UK with no prospect of change until the end of 2019, two years after (Cameron) has promised the public vote.”
 
So, if Cameron is re-elected “it will force the Prime Minister to hold a referendum on membership of the EU without reclaiming any power from Brussels, a position which is will make an exit more likely.”
 
This Breaking News therefore now makes a volatile market even more likely over not just the run-up to the General Election but for months beyond, as a referendum and all the changes that brings to Britain’s free trade agreements are now much more likely to go ahead. These will arguably be good changes for a free market, with less EU payments and more advantages within international trade. 
 
Now I take Blair’s pro-Labour blustering, and frankly interference, into the Election Campaign with a bag of salt, not even a pinch. Blair would have us believe the economic turmoil would be “chaos” if the UK left the EU.  Ignoring the mileage this gives Labour, even if he is actually half right, it is still another marker to move your portfolio into a more protective position re: downward risk. And again, that involves owning some Physical Gold and Silver, blustering aside.
 
A more accurate and important sign to me is not the dramatic wordsmithery of opposing politicians. But what the housing market might do. As Mike Maloney has long explained, the housing market and the gold and silver markets historically – and incredibly predictably – flow in opposing wealth cycles, much like two waves with their peaks and troughs diametrically opposed.
 
 
For a 10 minute video into the really clear market knowledge of Mike Maloney check out this short video and learn what cool terminology, such as “Dead Cat Bounce”, and why we’re staring straight at one!
 
So it is interesting to note that markets begun predicting last week of a downward slide in London House prices over the period leading up to and beyond the British exit from Europe, or Brexit.  This I believe bodes well for Physical Gold and Silver:
 
“With all the focus on Grexit in recent weeks, investors have not paid much attention to the risk posed by ‘Brexit’ or the possibility of the UK leaving the European Union.  That may be beginning to change as U.K. two-year government bonds posted the longest run of weekly declines in eight months today. Ten year gilt yields reached the highest level in almost three months last Friday. The fall in gilt prices is being attributed to concerns about rising interest rates. It is likely that some of the weakness could be related to election and ‘Brexit’ risk. Political risk has already been cited as a reason for a slowdown in the London housing market with RICS UK citing a number of “challenges” facing the London housing market including “an air of caution in the run-up to the general election”(The Market Oracle)

 
 
Bleyer recommends holding Physical bullion coins and bars in your portfolio, rather than paper certificates. The advantages are:

  • Bullion bars and coins are recognisable the world over, they hold their value wherever you are
  • Small bars and coins are highly transportable and discreet 
  • Bleyer offers buyback rates of up to 98% of the daily spot price
  • You can buy in a variety of sizes and values for easy release of capital and high fluidity
  • Some legal tender coins will be VAT & Capital Gains Tax free in the UK or other countries dependant on the coin.

For larger amounts we offer secure storage either on mainland UK or off-shore, together with a variety of home-safe options to purchase.  We also offer the ability to hold Gold in a UK Pension with some great TAX advantages:

“If you are a UK citizen, you can invest in Gold Bullion through your Self-Invested Personal Pensions (SIPPS). SIPPS are personal pension schemes containing a basket of investments of your choosing until you retire and start to draw a pension income. SIPPs can hold tangible investments, which can now include Physical Gold. Investments made in gold bullion are topped up in the form of tax relief, meaning individuals can claim back the tax on the money they put in. The amount varies depending on the income tax band into which they fall, so if you are a higher rate tax payer you can get up to 40% back. So, for example, a £10,000 investment will only cost you £6,000.”  See our Pensions page for more details and call one of the team on 01768 618618 to discuss your bespoke needs.

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