British investors have plenty of reasons to worry. The country is in the midst of a crisis – some say for the best, and others for the worse, but wherever you fall on the Brexit debate, you have to agree that political uncertainty is bad for business, and Brexit has caused no end of uncertainty.
If you’re worried about cash held in the pound or invested in domestic stocks, there are only so many alternatives for your money. You can invest in international stocks, but European stock exchanges are slowing down and Asian markets have been showing volatility based on slowing American growth. The US dollar was surprisingly strong in 2018, but even that’s beginning to change. It all begs the question, is there anywhere safe to keep your money?
According to the Royal Mint, gold purchases have significantly increased in the early part of 2019 largely on the wake of Brexit headlines, and they expect gold demand to continue to increase in the coming months.
To understand why British investors are putting their capital into gold, it helps to understand gold as an investment vehicle and how gold prices are affected by international events.
First of all, uncertainty drives gold. Businesses don’t perform well when they can’t predict what the market will look like a year from now, six months from now, or a decade from now. They make investment decisions such as expensive expansions based on how they expect to perform in long-term. In a situation like Brexit where no one knows what the regulatory or customs situation will look like in Britain a year from now, businesses can’t plan and avoid making significant investments. This drives stock prices down, and investors are wise to move their money to conservative assets. These can include haven currencies, bonds, and gold.
Arguably one of the biggest factors affecting gold prices is how major global currencies are performing, especially the dollar. The dollar is a favored foreign currency reserve and a great way to store liquid cash, but when its performance starts to decline against other currencies, gold is a superior alternative by far.
Inflation is another factor that can drive people to gold. Rather than looking at the dollar compared to other currencies, as the dollar’s buying power declines, investors who lack other options will return to gold. Gold is an inflation hedge, so when inflation outpaces interest rates, gold is one way to preserve your buying power.
Gold is a great solution for nervous investors. To buy gold coins and gold bars, going to an online gold shop is a great way to save. Online gold shops have lower premiums-over-spot than their physical counterparts. You can learn more at Silver Gold Bull, an online gold shop that sells gold in the UK, US, and Canada. Saving when you buy gold will help you achieve better returns when it’s time to sell your gold.
In times of uncertainty, it makes more sense to buy gold than risk your hard-earned savings on the stock market. You can always sell your gold later and rebalance your portfolio when the market improves.