Expect the Unexpected: The Brexit Spurs Gold



The unprecedented decision

In this series, we’ll cover the impact of the Brexit on precious metals and precious metal mining shares and funds.

Precious metals just saw their brightest day since the global meltdown in 2008 on Friday. Gold jumped to a two-year high of $1,362. Gold futures for August expiration closed at $1,322.4 an ounce. Silver followed the trend in gold and surged a whopping 2.5%. Silver closed at $17.8. Gold trading volume on Comex was almost eight times the average daily volume.

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The rise in precious metals was clearly a haven call since the Brexit was unexpected. Investors were pricing in little chance of the event, and market sentiment remained tilted on the Remain side of the referendum. Overall financial markets seemed quiet before the Brexit storm. The Leave camp got 51.9% of the vote, winning by a small margin. British Prime Minister David Cameron resigned after the Brexit verdict. He had urged UK citizens to vote to remain in the European Union.

Ripple effects

The unprecedented decision for Great Britain to leave the European Union raised questions about the stability and future direction of one of the world’s biggest economies. The ripple effects were also reached other major world economies. The Brits have put a question mark on the future performance of the global markets.

The increase in gold and silver also got core funds like the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) to surge a whopping 4.9% and 2.4%, respectively. Almost all the miners also saw an up-day and solid gains. Among the top performers on Friday, June 24, were B2Gold (BTG), Sibanye Gold (SBGL), and Gold Fields (GFI). These three shares rose 10.6%, 9.9%, and 9.4%, respectively, on Friday.

In the next part of this series, we’ll discuss how volatility spiked and supported gold and other precious metals.


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