Well, the Brits went and did it.
By a majority of over 1 million votes, the Brits decided to surprise the financial markets by voting to leave the European Union.
The vast majority of financial experts did not see this coming. Politicians did not see this coming. The EU did not expect it.
And now it has happened.
So how have the financial markets reacted at the end of June 24, 2016? The day the Brits voted to leave the EU.
- The S&P (US stock exchange) – lost 3.59%
- The FTSE (UK stock exchange) – lost 3.15%
- The Dax (German stock exchange) – lost 6.82%
- The Nikkei 225 (Japanese stock exchange) – lost 7.92%
- The CAC40 (the French stock Exchange) – lost 8.04%
Source: Google Finance
These major world stock exchanges are down significant amounts in one day.
A World of Financial Uncertainty
The turmoil and uncertainty will undoubtedly be resolved and a new status quo will emerge. It will take some time, measured in years not weeks, but calmer times will eventually arrive.
However, in the meantime, the markets don’t have a clear picture of what is happening.
And the financial markets do not like uncertainty. They become more volatile and unpredictable as a result.
So what does a bunch of British separatists, gold bullion and your retirement have in common?
- The Brexit has caused uncertainty in the financial markets.
- This uncertainty can dramatically affect your stock market investments – stock, mutual funds and ETFs alike. Values could be slashed for months or years.
- Gold bullion provides your retirement with diversification and protection from financial market crisis like Brexit.
So, on a day when stock markets around the world lost 3-8% of their value, how did gold fare on June 24, 2016?
- Gold bullion gained 5.15%.
To see how the gold price moved during June 22, 23 and 24 have a look at the gold chart below from Kitco:
The red line in the chart shows the value of gold rising as news of the Brexit comes through.
At one point gold gained 8% in the day.
Why Did the Gold Price Rise After the Brexit Vote?
In a world of uncertainty, investors look for safety.
They look for “safe havens”.
Gold has been a safe haven for governments and the wealthy for many, many years.
So when investors want to hedge against a riskier world, they buy gold and that will typically cause the gold price to rise.
Of course, the price of gold will continue to rise and fall according to a whole range of factors. However, on June 24, 2016 I think we all agree it rose because of the Brexit vote.
If you would like to read more about Brexit and the Gold price, have a look at these excellent posts from the financial media:
- NY Times – Overwhelmed by Brexit? Here are the basics
- CNBC – Gold Races to 2-year high
- Reuters – Gold Soars, Oil Slumps
- MarketWatch – Why Gold May Hit $15,00 by Year’s End
What Does Brexit Mean for Your Retirement?
The Brexit vote will make the financial markets more volatile for a time. This is not the first and certainly not the last time the world will experience a financial shock.
We must remember that the U.S. markets are not immune to the volatility of the markets of other countries.
Owning gold bullion in your retirement portfolio can help protect you against these higher levels of volatility.
We want to make the point that we do not recommend you invest your entire retirement savings in gold bullion.
If you put all your eggs in one basket, you will be caught out one day. Stocks, gold, bonds, real estate – they all have cycles and when some are up, others are down.
Holding gold bullion within your retirement portfolio protects you against swings in the markets. You can sleep better at night.
On the day the UK voted to exit Europe, the S&P lost 3.59% and gold gained 5.19%. Those investors who held already held gold bullion were able to rest easier as their protection against a financial shock, physical gold, went to work for them.
We recommend 10% of your portfolio to be in gold bullion but some investors are happy with 5% while others have 30% of their wealth in gold.
Of course, the choice is yours and should always be taken in consultation with a professional financial adviser.
How do you start? Order your free gold investment kit to learn the simple steps you can take to owning gold and protecting your retirement.