When the UK held its referendum on whether or not to leave the European Union back in June, the result came as some surprise to many people (including then Prime Minister David Cameron). While the public voted to leave the EU, the question that was asked of them was simply that, and there was no clear plan in place for what a Brexit would actually look like, how it would be implemented, or the shape of trade between the UK and the rest of the world once they devolved from the union.
Experts in the commodities markets cite both Brexit and the uncertainty surrounding it as the primary reason why silver was the top performing commodity seeing some dramatic rises in 2016, and gold also performed well.
Theresa May’s Hard Brexit Sparks New Surge in Precious Metals
These effects have carried over into 2017 already, with precious metals seeing surges in advance of Theresa May’s recent speech which sought to answer some of the questions around what form of Brexit her government is going to opt for. May announced that the UK would be going for what has been dubbed a ‘hard Brexit’ – that is, Britain would leave both the EU, and the European single market. As a result of this, the pound actually rose significantly, which is largely being attributed to renewed confidence in the British currency now that a plan of action has been confirmed. The FTSE 100, however, feels weaker as the dollar earning businesses on the index struggled with the strength of sterling.
Prior to the speech, however, precious metals saw rises, with gold going up 1% in the days prior to the highly anticipated speech.
Trump Further Encouraging Investors to Head for ‘Save Haven’ Investments
Brexit may have had a significant impact on precious metal prices, however the fact that Theresa May’s speech came just days before the inauguration of president elect Donald Trump in the US added even more uncertainty to the markets, with many analysts concerned that the Trump administration will be strongly protectionist.
Will Gold Peak Again?
In times of uncertainty and volatility, precious metals have always been seen as ‘safe haven’ investments, and this is why gold performed at its very best during the global financial crisis in 2007.
Source: Commodity Trade Mantra