Rare Coin Investor

Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, sending investors scurrying for protection in bullion and other assets perceived as lower risk.

Spot gold peaked at $1,358.20 per ounce and was up 5.6 percent at $1,325.10 an ounce, while U.S. gold futures for August delivery were up $67.40 an ounce at $1,330.50 off an early high of $1,362.60 an ounce.

Shares of gold mining companies also rocketed higher, with a fund tracking the industry opening nearly 8 percent higher.

“(Brexit) benefits gold because in a general risk-off mode, it’s a natural safe haven for everybody,” Marie Owens Thomsen, chief economist at Indosuez Wealth Management, said.

“Now that the UK has voted to leave, we think there’s a higher probability that the $1,350-1,360 per ounce level can be breached, and we’re therefore looking for an extended target in the $1,400s.”

Gold priced in sterling was last at 965.80 pounds an ounce, up 14.5 percent, having peaked at 1,019.03 pounds overnight. Euro-denominated gold was up 9.5 percent at 1,195.20 euros an ounce, off a high of 1,244.34 euros.

Gold dealers in London reported surging demand for coins and bars among retail investors on Friday, with some saying stocks were tight.

Britain’s vote to leave the European Union forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War Two.

World stocks headed for one the biggest slumps on record as the vote triggered 8 percent falls for Europe’s biggest bourses and a record plunge for sterling.

The single currency was under pressure as investors worried that the Brexit vote could encourage similar movements in other European countries.

U.S. short-term interest rates futures hit contract highs in early U.S. trading, boosting expectations the Federal Reserve may cut interest rates to help shield the economy from any global fallout.

“This isn’t necessarily about Britain, it’s about uncertainty in the world’s largest economy,” Amanda van Dyke, fund manager at Peterhouse Asset Management, said.

“The general commentators are suggesting that the Fed is no longer going to raise rates because the dollar is soaring, and they can no longer afford for the dollar to keep going as fast as it is.”

“Realistically, the ability of the European market to speak with a common voice I think has been permanently severed, and that’s going to be a solid 5 percent (price increase) in gold for at least the next couple of years.”

Silver futures were up 3.5 percent at $17.96 an ounce, while platinum futures were 3 percent higher at $994.60 an ounce.

http://www.kitco.com/news/2016-06-01/May-Gold-Coin-Sales-Increase-More-Than-200-From-Last-Year.html

It’s a tale of two markets: gold futures ended May with the biggest monthly decline since November but physical demand saw a significant increase from last year.

Sales data compiled by the U.S. Mint shows that a total of 95,000 ounces of gold were sold in May, up more than 206% from 31,000 ounces sold in May 2015.

Month-over-month sales was less impressive showing a 24% decline compared to a total of 125,000 ounces sold in April. Looking at the mint’s historical data, May is typically the start of slow season for the market; however, 2016 bucked the trend as this was the strongest May since 2011.

Silver demand was just as impressive as sales increased annually and month-over-month. The data showed that the U.S. Mint sold 4,489,500 ounces of silver in May, up 122% from 2,023,500 ounces sold in 2015, and up 10.5% from 4,072,000 ounces sold in April. This is the fifth consecutive month the mint has seen sales of more than 4 million ounces; in January of 2016, silver coin sales hit almost 6 million ounces.

George Gero, managing director with RBC Wealth Management, said that it is interesting to see the differences between the two markets. He explained that futures markets are weaker as short-term speculative investors slack their exposure to gold in the face of potential interest rate hikes. However, physical gold and silver buyers represent long-term investors.

“Looking at the physical markets you can see signs of long-term strength,” he said. “Coin buyers are going to be selling their physical gold any time soon.”

Phillip Streible, senior market strategist at RJOFutures, said that he is not surprised that investors are jumping into the bullion market. Global financial uncertainty and shaky equity markets makes gold and silver an attractive investment, he said.

“Physical buyers just don’t have any faith in the economy and the system and want a store of wealth they can trust,” he said.