The value of the pound and euro are tanking Friday morning after the
United Kingdom voted to leave the European Union, and the value of
gold and silver are flying high.
Safe-haven precious metals purchasing is likely behind the surge in
the prices of gold and silver, which currently stand at $1,321.30 and
$17.81 per ounce, respectively, according to Bloomberg.
Kitco News reported Friday morning that gold
rallied approximately $100 overnight, but fell back by about $40
"as profit-taking set in."
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The vote in support of the UK leaving the EU, which is being
referred to as the Brexit, was confirmed in news reports overnight.
RELATED: Coin dealer issues Brexit medal for undecided
voters in referendum
"Global markets have been in a tizzy," Kitco reports,
"with the British pound tumbling to a three-decade low, the euro
also weakening, global stock bourses tumbling and most commodities on
Bloomberg reports that the gold surge is the
most drastic since the height of the 2008 global financial crisis. The
price of gold stood at $1,255.60 at 6 pm ET Thursday. That represents
a 5.2 percent increase.
Chris Howard, the Royal Mint's director of bullion, issued a written
statement Friday stating that it has seen a "significant
spike" in gold purchases, especially at its online bullion
trading platform, where there has been a 550 percent increase in
traffic when compared to the same time Thursday.
"Whilst we are uncertain at this stage what impact the results
of both the European Referendum vote and the U.S. elections will have
on the gold market in the long term, we have ensured that with The
Royal Mint’s bullion trading platform www.royalmintbullion.com
and our significant gold holding, we are prepared for possible market
turbulence," Howard said in the statement.
What's causing markets
If and when the UK does indeed leave the European Union, there are
concerns that it would disrupt the entire European economy.
"Britain's economy and legal system have become deeply
integrated with the European continent," Vox reports. "Unraveling those
relationships is likely to be economically and socially disruptive."
So the news of the vote, which is nonbinding but is expected to lead
to the UK's departure, is leading to a lack of economic confidence in
Europe. There are also concerns about the UK's economic future outside
of the EU.
As of 10:01 a.m. ET, the euro is valued at $1.10. The pound, as
well, is suffering. It's currently at $1.37.
Why are gold and
silver prices spiking?
Gold and silver investing has historically been viewed as a hedge
against the unpredictability of the overall economy, and in turn, a
safe haven when other markets experience a downturn.
Gold is valuable. That is based on the fact that we know there’s not
a lot of it, and we know it is appealing to people. So while the
health of someone’s investments in the stock market is subject to the
performance of the companies invested in, gold is a known commodity
with a value that, while it does fluctuate over time as we’ll explain
later, generally does not fluctuate with the suddenness that a
company’s stock can.