Gold demand jumped threefold in the last 48 hours as the world’s stock markets slumped and investors clamoured for a safe-haven asset. Gold investment firm The Pure Gold Company saw a 319% increase in people investing in gold on Wednesday and Thursday, compared to the 2018 daily average, amid panic that the billions of pounds wiped off the equity markets may well mark the beginning of a deeper crash.
CEO Josh Saul said: “People were buying gold at a pace not seen since the day the Brexit referendum was announced in 2016 (when the gold price jumped by 23%). Investors seemed panicked and genuinely scared that they could not liquidate stocks quick enough for them to purchase gold while the price was still low. The buying continued into Thursday evening as our clients looked to protect their wealth from further falls in the global markets.
“As stock markets across the world have fallen steeply over the past two days, the gold price has jumped 3% as investors have poured their assets into the precious metal. But even with this rise, the gold price is still almost 10% down on a year ago, and almost 30% cheaper than its 2011 all-time dollar high.
“64% of people investing in physical gold on Thursday had sold equities to fund their gold purchases, and 49% of these clients came from investment banking. 42% of investors were first time gold purchasers. Their overwhelming concern was that this slide could mark the beginning of a deeper correction. There seems to be good reason to worry – Brexit uncertainty, trade wars, interest rate rises in the US, and precarious emerging market economics are all weighing heavily on market sentiment. Three-quarters of our clients think there will be a further decline in global markets.
“Our clients’ primary objective is not growth; its wealth preservation. Gold acts as a hedge during times of crisis, including an equity crash. Whilst some people are hedging their losses in the equity market with the gains they have made in the gold price, others have decided to remove absolute exposure to equities and put a larger percentage of their overall net worth into physical gold. People appreciate that the gold they now own is as liquid as the cash they have in their bank account, and more liquid than their equities, but essentially without the counterparty risk. Many of our professional clients plan to protect their wealth with gold until other assets classes are considerably cheaper, then convert their gains in gold to take advantage of undervalued stocks.
“So far in October we have seen a 276% increase in people removing exposure to equities within their pensions and SIPPs to purchase physical gold within the same vehicle. Soon-to-be pensioners are concerned that by the time they reach retirement their pension pots may have lost considerable value and won’t adequately equip them for retirement.”