Gold Prices Post-Brexit: Analyst Opinion

With Brexit now behind us and the gold price rising significantly above $1,300 an ounce ever since (although dropping slightly here and there), gold has undoubtedly been a hot commodity for investors.

Year-to-date, the yellow metal had increased $288.02, from $1,076.30 to $1,354.13 as of 1:18 p.m. EST on Monday. Gold has rallied due to a combination of a weaker dollar and post-Brexit fears.

With that in mind, the Investing News Network (INN) recently spoke with Marin Aleksov, founder and CEO of Rosland Capital about a variety of things, such as:

• why people are investing in gold post-Brexit;
• what people should be aware of when investing in gold after Britain’s decision to leave the EU;
• if gold prices should be rising;
• if Brexit’s outcome will make it difficult for Feds to raise the rates;
• how gold will react to the upcoming US election.

Below is a transcript of our conversation. It has been edited for clarity and brevity. Read on to see what Aleksov had to say.

INN: So, after the Brexit, gold prices were as high as $1,339 per ounce. Which direction do you see the gold prices going now?

Marin Aleksov: Well, there’s uncertainty out there, and people are running to store value and we can see it here. I think $1,400 by the end of the year is a realistic target for us. There’s going to be some profit taken along the way, I’m sure… fluctuations. So I think there’s a pretty good chance of it ending up there with everything that’s going on and we have an election in the US. It’s going to be a double-header this year. For some reason, if Trump wins there will be more uncertainty in our opinion, so $1,400 is very very realistic for us.

INN: Why in your mind do you think people are investing in gold due to Britain’s decision to leave?

MA: Well the uncertainty is, they’re going to have to redo all the trade deals. You have a situation where the markets worldwide are caught off guard and the bond market too. I mean, what’s the Eurobond now? How does that exist? It’s the uncertainty. People are running towards gold to project some of their assets. They’re not going to put all of their money into it, but they are definitely going to start diversifying.

The outcome from this is going to take years. One thing we also know is most likely we’re not going to raise rates here for awhile due to that. That also gives gold green pastures ahead of it. So far, the notion of raising the rates have kept going down because everyone says, ‘well if they’re going to raise the rates, they’re going to raise the rates.’ Now, I think there’s a year or two-year window where we can comfortably say they probably won’t and I think that will help gold as well. I mean, it’s a variety of things, but I think that’s one of the biggest ones.

INN: What should investors be aware of if they choose to invest in gold with the uncertainty in Brexit’s aftermath?

MA: The money you cannot afford to lose is the money people normally put into gold. Gold is not to make a million dollars. Gold is about protection and that’s what it is. My advice to investors out there is: protect what you’ve done, and if you have gains in the market, now’s a good time to diversify.

Just be prudent. I think that’s the best right now because no one knows. No one has a crystal ball.

INN: Do you think the gold prices should be rising?

MA: Absolutely. Again, it’s because where else is there to go? Currencies are now in flux. If one thing’s steady it’s gold and good currency is not backed by anything. It’s all over the map now. As we know, having a strong currency is not the best thing out there. So I think it’s going to be raised to see who has the lowest at some point. With the currency going to war like this, gold is the most steady of them all. If you look at the prices of the last two years, eve though it’s dropped, it’s still pretty steady.

I mean,when I started 15 years ago, it was $200 an ounce, and this is steadily, steadily going up. We hit $1,900 an ounce a few years ago as you know, and now it’s still at $1,300. But the uncertainty out there has not stopped, it will only get worse. That’s our view on it. With this, recession now becomes a bigger issue worldwide, not just in the US. Are we going to have one, are we not going to have one? If, when, is inflation going to be an issue. There’s a lot of unanswered questions out there, and why not have some protection.

And also, gold is the only thing that you don’t trust in institutions. We focus on physical gold. We actually deliver it to you and that’s what a lot of people like They have control, it’s in their hands.

INN: What do you think has driven the gold price up so much this year?

MA: In the beginning, when they suddenly raised the rates and they raised the rates at the beginning of the year, what that does, and from a lot of people that we hear from is, “they are raising the rates because they have to stay ahead of inflation.” So a lot of people have been worried about if inflation actually takes off, what’s a good asset to be in? And the first thing that pops into people’s minds is gold. I think a lot is driven for that as well, even though they say, ‘there’s no inflation, there’s no inflation.’

As mentioned the stock market was very shaky at the beginning of the year and people like to diversify when that happens and now you have this. So, what’s happened now really reinforces everyone that was on the fence for gold. It reinforces everyone that did invest in gold as it did the right thing. And guess what, they’re going to keep going now. That’s how it usually works.

INN: How do you think the performance of other asset classes will affect the gold price?

MA: Well, usually if oil goes high, gold loses to the dollar, basically. So if the currency gets stronger it usually pins gold down. Those are the things you have to watch for. If the dollar really rallies, if the pound breaks down, I think the upside for gold would be slower. If it turns the other way, and the US dollar starts having problems, if the stock market has problems, if we have recession, then for gold there’s nothing ahead of it to stop it.

INN: Will the UK outcome make it difficult for the Feds to raise interest rates?

MA: Well, it’s going to be uncertain. How do you raise the rates when you have no idea what this market is going to do.  They lost so much money [since Brexit]. Is it going to propel other currencies into a recession? Is Denmark, is Finland, is Sweden, is Netherlands, is Spain, is Italy going to say, “hey, we want out.” Ireland? Who knows. But when you have a big guy like England leaving due to the fact of their own issues and immigration and so forth, which seems to be what made it happen. France is in the same boat. Spain, Italy. Italy has always been on the cuff. The Euro has not really worked out for them. You have Greece who is about to leave every month. So, it could be a domino effect. We all know Finland wants out. I don’t think Sweden wants to stay in too long.

So the EU now has to keep it together and, unfortunately, the only way to do that, I think, they have to punish England. People say they won’t, but in order for them to stop this, they have to somehow punish England for doing this and I don’t know what that punishment will be. But, it has to deter other countries from doing the same or this thing falls apart.  And if this falls apart, there will be years of uncertainty. You have no idea. People are going back to their own currency, how do you price that in? And again, what happens if it bombs? What’s a Eurobond now? These are questions that most people out there work for a living are asking themselves. They’re not financial advisors. They don’t watch the market every day. They just hear uncertainty, and they are running for protection.

INN: Do you think, now that this has happened to Britain, that gold will react to the upcoming US election?

MA: I’ve been through a lot of elections here in this market, and usually what happens during elections, the market kind of stays steady. You always think it’s going to be some big movement, but it really doesn’t happen. Unless there’s a big shake-up, and I don’t see that happening no matter who wins. Usually, people wait to see what happens before they start making any moves. They want to see who’s going to win, what’s going to happen, who’s going to be in charge of this, who’s going to be in charge of that. I don’t see a big movement due to just the election itself.

Unless there’s some big concern if Trump wins, but I don’t see that either. I mean, he’s going to have his cabinet, he’ll still have a congress, he’ll still have a senate. It’s not like it’s going to change overnight. Are taxes going to be an issue? I don’t know. It’s going to come down to global economy, it’s going to come down to currencies, and it’s going to come down to volatility. And that’s just the history I’ve had during elections. It’s usually a very very time to call.

INN: Is there anything else you’d like to add?

MA: The only thing I can add is, again, is to investors out there, do gold not to make a million dollars, use it to project yourself and your family, because we’re on uncharted territory at this point not just domestic, but globally. As you can see, one little mishap triggers a worldwide avalanche. That means everyone’s interconnected and sometimes you have to project yourself because no one else will.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.