Last week’s landmark vote in Britain to leave the European Union (EU) has hammered the global markets, crushing the British pound to its lowest level in 31 years.
With political rudders across Europe now swinging wildly, what is next is anyone’s guess.
The downward pressure on the embattled British currency is so strong, in fact, that Shaun Osborne, Chief Currency Strategist at Scotiabank thinks it possible the pound might be trading at an equal level with the U.S. dollar by the end of 2016.
As we’ve reported, investing titans like George Soros, Stanley Druckenmiller and Paul Singer have long recommended to buy gold assets as a portfolio protector against an event like Brexit: one where traditional paper assets and the currencies they are denominated in can go haywire.
As billionaire Ray Dalio has said: “If you don’t own gold, you know neither history nor economics.”
Still, with gold up over 30% this year alone, you might be wondering… is this the right time to acquire gold?
Have I Missed the Rally in Gold? Ask Goldman Sachs or Alan Greenspan
It’s not too late to follow Soros’ strategy and get your retirement assets better diversified before the next big shock hits.
Former Federal Reserve Chairman Alan Greenspan thinks that Brexit is a more difficult problem than most investors realize and recent events are just “the tip of the iceberg.” Greenspan believes the root cause of all the market turmoil is the massive slowing of real incomes across Europe: a harsh economic reality that he believes is here to stay. He sees more political aftershocks to come as the Scottish Nationalist Party tries to resurrect Scottish independence and the root causes of Brexit and public disaffection throughout Europe remain untreated.
Financial analysts agree:
Goldman Sachs lifted its view on precious metals to “Attractive” from “Neutral” following the UK vote.
Robin Bhar, Head of Metals Research for Societe General, said: “We expect [gold] prices to rise to $1,400/oz, with follow-through strength extending to the rest of the precious metals sector.”
Zev Spiro, CEO of Orips Research, said “Gold is going to $1450/oz.”
Current Federal Reserve Chairperson Janet Yellen has warned that Brexit could have serious consequences in the financial markets and economy going forward. She expects we are entering a period of extended market uncertainty that makes the U.S. economic outlook even murkier.
With the Brexit vote done, the big question now is which European nation will be the next country to leave the EU. Populist political parties in France, Germany, Italy, Spain, Portugal, Greece, the Netherlands, Sweden, Denmark, Austria, Poland and Hungary are chomping at the bit to leave the EU, and we could see a similar referendum in France soon. The Eurosceptic genie is out of the bottle and will not be put back.
Buy Gold and Wait
Expect bargaining between Britain and the EU to take years. The political and legal uncertainties for British and European companies will cause serious economic hardship and pain. The financial markets will be feeling the effects of Brexit for some time to come.
People who have invested in gold will breathe a sigh of relief amidst the chaos, anger and fear.
Act now because physical gold and silver inventory is already showing signs of short supply. You owe it to yourself and your loved ones to take charge in uncertain times and diversify your portfolio with the one asset that lets you sleep more soundly at night: gold.
