With the momentous decision by the British people on June 23rd through the Brexit Vote, the UK is no longer part of the European Union. This massive political change has brought about a frenzy of gold purchases in the UK, and had caused the price of gold to soar. What other effects will this change have in the numismatic world?
On June 23, the British people defied political elites in their country and most of recent polls on the issue and voted decisively to leave the European Union. No country in the EU, as it is known, has ever voted to leave the union, and this dramatic move immediately created massive political and economic uncertainty with significant repercussions for Britain, Europe, and the entire world.
Markets and investors don’t like sharp spikes in uncertainty, or what is called “black swans,” and equity and other markets immediately began tanking upon news of the decision. The British pound started to decline sharply against other currencies and precious metals, especially gold, moved to their highest levels in two years! Overnight, gold spot price reached as high as $1,340 an ounce, up $70 compared to the previous day, and silver touched $18 for the first time in several years.
In Britain, the Royal Mint, which sells bullion directly to consumers, saw a huge increase in the number of new buyers overnight, and local bullion dealers reported a big surge in demand for gold coins and gold bars, especially gold sovereigns and Britannias, on June 24.
It is important to remember that the current strength of the dollar masks the true increase in gold prices, and in British pounds gold was up over 10% compared to 8% in USD.
With the potential for a sharp reduction in growth, trade, and investment, and a big increase in unemployment, not to mention continuing downward pressure on the pound, those with assets to preserve in Britain quickly saw the importance of buying or adding to their precious metal holdings.
And since Britain is the world’s fifth largest economy and a close ally of the U.S., you can be sure that the aftermath of the vote to leave the EU will impact people all over the world.
These events are happening at a time when precious metals were already having their best year in a long time, with gold and silver each already up 20% or more for the year before the Brexit vote, as it is known. Analysts had been arguing for some time that metal prices were due for a substantial move higher after hitting a four-year low at the end of last year with gold at the $1,050 level.
Well before the Brexit vote, so many underlying trends and fundamentals were already supporting high precious metal values this year and likely in the years to come. These factors include especially:
Extremely low interest rates around the world, even negative rates in Europe and Japan, and ongoing money printing by the world’s central banks
A gold supply crunch as many mines have had to close down due to the cost of production not being high enough to support their activity
Demographic trends with rising middle classes around the world, especially in Asia, seeking protection of their wealth and high demand for gold in China and India
Rising investment, physical demand, and safe-haven demand around the world
Financial and geopolitical uncertainty due to everything from concerns about the global economy to terrorism, and the potential for recession and trade wars if Donald Trump were to become president and make good on some of his promises
The rising role of China in the gold trade, especially the new Shanghai gold exchange and the Yuan-denominated gold fix.
The Brexit vote is going to be an ongoing event likely to impact the world’s financial and economic situation over the course of the two years that Britain has to negotiate its exit from the European Union. That combined with the preexisting positive environment for high metals, appears to have created what could be considered a perfect storm for metal investors and coin buyers.
Many experts now see gold prices easily reaching $1400 and higher in the coming months and much more than that in the coming years no matter how the British exit from the EU works out.
It is always advisable to have insurance against greater uncertainty with gold and other precious metals in your holdings, and that case is even stronger now. The world faces a prolonged crisis in which Britain seeks to figure out how best to leave the EU, while trying to do so on advantageous terms without disrupting its own economy or its trade with countries in Europe and around the world. This will be very challenging, to say the least!
Precious metal coins, both bullion issues and collectible, are considered by many to be important components to their holdings. With demand spiking not just in Britain, but around the world, it will become harder in the coming weeks and months for dealers to fill orders with the available supply. Major Mints around the world are likely to be unable to meet the demand either.
Low-premium bullion coins such as American Gold Eagles are always a great choice, but remember that collectible coins made of gold, silver, and even platinum are also a good hedge against an uncertain environment.
With the spot value of metals spiking, the premium on these coins for their collectible value will decrease, making them a great deal. In addition, if metals do continue rising, coins you purchase now will see the value of their precious metal content rise. Having some of both types of coins is always a smart way to go.
In the current situation, a lot of focus will be placed on the advantages for investors of precious metal bullion coins, but there are also great opportunities now to pick up those collectible coins with precious metals content that you have been wanting to add to your collection. MCM carries an extensive range of such coins from the U.S. Mint and Mints around the world, including classic American silver and gold coins, and even ancient coins.
ModernCoinMart (MCM) recently carried a 3g silver coin issued by the Cook Islands that commemorated Brexit with a sharp Colorized Proof image. Produced by the world-famous Coin Invest Trust (CIT) in Lichtenstein, this high quality coin depicted Great Britain in the famous Union Jack colors with continental Europe next to it. Despite its small weight, Smartminting technology allowed the coin to be struck with a large 26mm diameter! These coins proved to be immensely popular, and sold out on our website within hours of them being put up for sale!
Despite the fact that these silver coins are no longer available, MCM has just made a gold version available for presale! While the silver coins were obviously very popular, a coin struck out of gold serves as a better reminder to the hectic market observed after the Brexit vote. This stunning coin is struck out of 1/10th oz. of .9999 fine (24 karat) gold with the same colorized proof design seen on the silver version. Showing off a different version of their Smartminting technology dubbed BGM (Big Gold Minting), CIT was able to expand the diameter of the coins to 26mm! That is nearly double the size of other 1/10 oz. gold coins. With the silver version selling out so quickly, you will need to act quickly to secure an order for yourself!
Ungraded examples of the Brexit coin will be shipping starting July 25th, and examples graded Proof 69 and 70 by NGC will begin shipping a few days later, on July 29.
Celebrate the historic Brexit vote by placing your pre-order for the 2016 Cook Islands $20 1/10 Colorized Proof Gold Brexit today!
||Louis is an award-winning numismatic journalist and writer specializing on modern coins. He has been writing a weekly column for CoinWeek since May 2011 called “The Coin Analyst,” which focuses primarily on modern U.S. and world coins and developments at major world mints. In August 2015 he received the Numismatic Literary Guild’s award for Best Website Column for “The Coin Analyst.” He is also a contributor to several magazines, including Coin World, where he writes a bimonthly feature;The Numismatist, the American Numismatic Association’s monthly publication, where he writes a monthly column on modern world coins; and American Hard Assets. He began writing about coins in 2009. He is a founding member of the Modern Coin Forum hosted by ModernCoinMart and has written articles for MCM since 2014. He has collected classic and modern U.S. and world coins since he was about 10 and first joined the ANA in the 1970’s. He was previously a congressional relations specialist and policy analyst at the Congressional Research Service of the Library of Congress and a syndicated columnist and news analyst on international politics and national security for a wide variety of publications. He has been writing professionally since the early 1980s.|