This Is What Gold Does in A Currency Crisis, Brexit Edition

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In June 2016, the UK shocked the world—or at least the world’s elites—by voting to pull out of the European Union. Economists predicted disaster, EU leaders threatened pain for British exporters and tourists, and the media settled in to watch the UK shrivel and die.

This Is What Gold Does in A Currency Crisis, Brexit Edition | BullionBuzzFour months later, the appropriate response is a yawn rather than a scream.

CNBC said first indications of how the UK economy is performing in the aftermath of the Brexit vote would be heralded by the release of quarterly GDP figures. Analysts said they forecast a 0.4% growth in the third quarter of this year, an ‘upside surprise’ following the decision last June to leave the European Union. Prior to the vote, many market observers were pointing to economic contractions if voters opted to leave the EU.

The pound, however, did fall hard in foreign exchange markets, which is good news for British exporters, who are winning round one of the post-Brexit currency war by selling cheaper things to the rest of the world.

The only losers were the Britons who held their savings in local currency and saw the value of their bank accounts fall dramatically. But the solution was simple: convert their pounds to gold, and watch it soar.

Britons who did this are up about 25%, which is a pretty good year’s work for any money manager, amateur or professional.

As the ‘Brexit will be a disaster’ drumbeat gets louder and negotiations with the EU drag on, gold should remain a simple, low-stress way for anyone with British currency to sail through the process unscathed.

As the world descends into debt-driven chaos, the gold vs. currency result will be replicated in most national currencies, giving everyone a chance to learn from the UK’s example.


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