Modern Numismatics

Louis Golino has been a collector of American and world coins since childhood and has written about coins since 2009. He writes about modern coins and other numismatic issues for Coin World. He is a founding member of the Modern Coin Forum.

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Early Friday morning when the world learned that the British people had unexpectedly voted in a referendum to leave to the European Union, popularly known as Brexit, the price of gold and silver shot up to the highest level seen in two years.

In fact, the Royal Mint, which sells bullion directly to consumers, reported today that visits to its precious metal trading platform were up 550% compared to yesterday, and new accounts were up 200% for the same period. 

Investors are seeking refuge in gold from all the economic and political uncertainty surrounding the British move, which immediately sent the value of the British pound down very sharply against other currencies and roiled the world’s equity markets with futures in several countries down more than 10%.

Gold was up $70 from its level on Thursday, reaching $1340, and silver touched $18, but the strength of the dollar masked the fact that in non-dollar currencies gold was up even more.

Metals had already been doing well this year, up around 25% compared to the four-year low reached late last year, making them one of the best-performing asset classes of the year.

Gold analysts in particular have been arguing for some time that the yellow metal was due for a substantial correction higher because of fundamental factors such as record demand and tight supplies and the increased role of China in the gold trade, which includes a new gold exchange and their own version of the daily London gold fix. 

But they key factor underpinning the move higher, and one of the main reasons it is likely to continue, has to do with interest rates.  With sluggish growth and heightened economic uncertainty due to geopolitical tensions, problems in China, Brexit, and the prospect of a potential Trump presidency producing a trade war and economic recession, rates will continue to remain close to zero and central banks will continue their policy of quantitative easing.

This is the perfect environment for precious metals, so analysts who specialize in this area see higher values going forward later this year and continuing into the future, especially as the high levels of debt in most countries reach the point where governments may not be able to afford to continue paying the finance costs to service their debt, which could produce an even greater global economic crisis at some point than the one that began in 2008. 

It's never a good idea to put too many eggs in the same basket, but what is happening now is a good reminder that diversifying one’s assets by including some gold in your portfolio offers helpful protection in an uncertain world.