Dear Readers,
After a sad and difficult few weeks for the U.K., we take a look at how the Gold and Silver price moves in relation to all the activity surrounding our General Election in June.
The impact of the UK’s General Election on Gold & Silver prices
This month, we’re only going to focus in on this one large key event. Interestingly, the price of Gold often moves counter-intuitively before elections – it drops:
“The gold price in an election year – and in the days leading up to the election – has historically dropped.” (Investing News)
Looking at the most recent U.S. election for example; “The yellow metal suffered its biggest one-day percent loss in five weeks on Monday (November 7), although it still hovered between the $1,280-$1,290 per ounce mark.
To put things in perspective, back in the spring 2008, the gold price was roughly $1,000 an ounce. By the time the election came around in November, it fell to $740.
Last year’s election was is a little bit different; although the gold price dropped closer to the election, it was still up over 20 percent year-to-date. This suggests investors are fearful of the outcome.” (Investing News)
If Gold and Silver rise with a fear of change, one would expect the bumpy ride of uncertainty before an election to raise the price, not to see a fall. Indeed, this was the case in one of the largest Physical Gold markets in the world – India:
Back in 2014, the “Outcome of [the] general election due with prospects of a stable new government would influence gold prices apart from equity markets, a study said.
“Gold prices in India may increase beyond Rs 32,000 per 10 grams in the coming few months in case the voters throw up a highly fractured mandate leading to an unstable government at the centre,” industry body Assocham said in a study.
On the other hand, in case India gets a decisive government after elections even within a coalition framework, the investor bias will return towards equity and real estate and gold may lose in the bargain of portfolio shuffling.
In its study ‘Golden Connect of Indian Elections’, the industry body said at the moment, three important factors are driving the global gold market.
“Concerns over Chinese economy, uncertainty over the pace of the US economic recovery and the anxiety around the Indian general election. India and China are competing with each other for retaining the slot of being the number one consumer of the yellow metal.
“The demand in these two markets is going to increase should the two economies witness political or economic uncertainties,” says the study.
It said the trend of the investors is shifting again to gold as a safe haven asset as prices have risen over 10% so far this year.” (Times of India Business Section)
What is the price of Gold and Silver up to right now in Britain?
Our Gold and Silver price in G.B.P. has been on a slow recovery from a low on 9th May but is still 2.62% down on the previous 3 month high.
So, our Gold price doesn’t seem to be acting in line with U.S. patterns regarding previous elections in falling in price but more in line with India’s sentiments towards physical Gold, with a slight rise in line with a little uncertainty. To be honest, I think this shows a more realistic approach to Gold as a safe haven and a more honest view towards an economy built on paper currency and debt as a house of cards.
Speaking of which, if we’re talking ‘political events’ the new series of ‘House of Cards’ returned to Netflix yesterday! Frank Underwood, a terrifyingly ambitious political character claims “Democracy is so over-rated.” Let’s hope no politician who believes the same gets into government in the U.K.
Of course, this GBP Gold price rise may also mean there are multiple factors playing into the price of Gold and Silver at any one time, just as the Indian report also concluded.
Because, although our General Election headlines dominate our front pages, as the Asian continent report above so clearly identified, all other global financial fundamentals always continue to churn on behind the scenes during a nation’s General Election. And Gold is – after all – a global safe haven, not just a British one.
Election outcomes and how they might affect the Price of Gold
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The Telegraph raises the prospective of a Hung Parliament in this morning’s headlines. That level of uncertainty would hit the economy and the price of Gold and Silver deeply with sharp rises.
- If the Conservatives are returned to government then the immediate procedure of withdrawal of the U.K. from the European Union may raise the price of Gold and Silver slightly. If done smoothly, less so. This is ignoring other international factors beyond our control affecting the Gold price obviously.
- If Labour beat the odds and get into Government, the reaction in the Gold market would be much greater due to the Labour position in regard to E.U. negotiations being far more unknown.
- For our clients in Scotland, the election outcome will lead to either a quieter call or greater demand for a second independence referendum. This would add uncertainty either way.
Now, if our readers are drawn from all political leanings, each of the above options will make some of us wince, or celebrate. But together, we can all be smart Gold investors.
Headlines of Uncertainty
This week alone the price of Gold has risen 2.41% or £23.14 per troy ounce. From the uncertainty of ever changing headlines and pollster results, this is no surprise:
“At the start of the campaign some polls had the Tories at almost double the vote share of the Labour Party, indicating that the most likely outcome would be a landslide victory that would increase Theresa May’s current working majority of 17 in the House of Commons. However, May’s lead has dropped from 17.8 points to below 10 in our poll tracker since she called the election on April 18. This is a rolling daily average of the last eight polls. While the pollsters still give the Tories a clear lead, the the party’s dwindling advantage will be a concern to party headquarters, and a boost to their rivals.” (The Telegraph)
For a good read here’s a link to an article entitled ‘Here’s why you should buy gold ahead of the 2016 election‘ It’s regarding the U.S. election but all the rational and history of economies can be applied to our economy.
Gold is a safe haven in times of political, economic and international uncertainty and we can feel this becoming increasingly true. Watch the latest Jeremy Paxman interviews with Jeremy Corbyn and Theresa May below.
Call Bleyer to talk through your hopes of wealth preservation and how you can use Gold and Silver to compliment your current savings and investments. Tax savings are on offer with certain Gold and Silver products. Gold is also available to use in your current or new Pension. In addition, Bleyer offer a variety of home safes and storage options. Please call 01769 618618 to discuss any of these options with one of the Bleyer Team.
