Hard Brexit Sparks Safe Haven Sentiment in Gold

The gold market has been rallying in recent weeks as fears of a hard Brexit intensify. Gold has traditionally been viewed as a safe haven asset, and the uncertainties surrounding Brexit have once again highlighted this role.

What is a Hard Brexit?

A hard Brexit refers to the scenario in which the UK leaves the European Union without a trade deal in place. This would result in the UK and the EU trading on World Trade Organization (WTO) terms, rather than the current free trade agreement that exists. It is widely considered to be the worst-case scenario for the UK as it would result in significant disruptions to trade and damage to the economy.

Why is Gold a Safe Haven Asset?

Gold has long been considered a safe haven asset because it is not tied to any particular currency or country. It is also a tangible asset that has been used as a store of value for thousands of years. During times of uncertainty and market volatility, investors typically flock to safe haven assets like gold to protect their portfolios.

The Rise of Gold

As the likelihood of a hard Brexit increases, so does the demand for gold. In fact, gold prices hit a six-year high in early September as fears of a no-deal Brexit intensified. The uncertainty of a hard Brexit has led investors to seek out safe havens to guard against market fluctuations and potential economic turmoil.

But it's not just Brexit that's driving up the price of gold. Other geopolitical concerns, such as the ongoing trade war between the US and China, are also contributing to the rise in gold prices. The growing tensions between the two economic powerhouses have led investors to seek out safe haven assets such as gold, as they look for shelter from the volatility of the stock market.

The Future of Gold

While the future of Brexit remains uncertain, one thing is clear – the demand for gold as a safe haven asset is unlikely to abate any time soon. The ongoing trade tensions between the US and China, as well as other emerging geopolitical risks, will likely keep demand for the precious metal high.

Moreover, with central banks around the world continuing to loosen monetary policy, gold is also seen as a hedge against inflation. As more and more investors seek out safe haven assets, the price of gold is likely to continue its upward trajectory, at least in the short term.