Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16
The Peak Oil Paradox Revisited - 19th July 16
SPX Challenges the Upper Trendline - 19th July 16
Missing ’28 Pages’ of the 9/11 Report Released into Blitzkrieg of World Events - 19th July 16
Likelihood of Organized Disruption at GOP Convention - 19th July 16
More on the ‘Breadth Thrust’ and Stock Market Internals - 19th July 16
FX Traders: Get a Free Week of Forecasts (Details inside) - 19th July 16
Ups and Downs in Gold and Crude Oil Price - 19th July 16
Keep an Eye on ‘Bitcoin’ as the Next ‘Financial Crisis’ Starts! - 18th July 16
Erdogan Might Have Known about the Coup but Didn’t Prevent It on Purpose - 18th July 16
More Deflation Ahead: Silver, Gold And Their Mining Stocks A Must-Have - 18th July 16
Stock Market Minor Top? - 18th July 16
5 Best Gold and Silver Junior Mining Stocks in 2016 - 17th July 16
Gold And Silver – NWO-Created Tragedies Will Never End, Seek Truth - 16th July 16
How Long Can Buybacks Continue To Support A Market Which Is Standing On A Fundamentally Flawed Premise? - 16th July 16
Will They Come For Your IRA? - 15th July 16
Gold’s Record Selling Overhang - 15th July 16
Capitalism Has Entered a New Era—and Historic Stock Market Investing Returns Are Gone Forever - 15th July 16
Gold Price Could Hit $5,000 or Even $10,000 in a Few Years - 15th July 16
Junior Gold and Silver Mining Funds or Individual Gold and Silver Mining Stocks - 15th July 16
The Soaring Risk of Flying in Bernanke's Helicopter - 15th July 16
The Broad Stock Market, Helicopters and Gold - 15th July 16
The Curious Case of Vanishing Lady Liberty; Only Gold and Silver Remember Her - 15th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Forex Forecasts

This Is What Gold Does In A Currency Crisis, British Edition

Commodities / Gold and Silver 2016 Feb 24, 2016 - 03:44 PM GMT

By: John_Rubino

Commodities

It appears that Great Britain might actually do the until-recently-unthinkable, and leave the European Union. The reasons for this dramatic break-up are many, and can be Googled easily enough. For our purposes, suffice to say that traders are scrambling to figure out what this means for the British pound, and they’re not liking the answers. Here’s a quick look at the recent foreign exchange action:


The pound just hit a 7-year low — and there’s no revival in sight

(MarketWatch) – The pound has been clobbered this week, driven close to seven-year lows against the U.S. dollar — and analysts don’t see any catalyst in sight to turn that fall around.

The pound on Tuesday dropped below $1.39 against the greenback for the first time since March 2009, hitting an intraday low of $1.3879, according to FactSet. Sterling versus the dollar — known as “cable” — has lost roughly 3.5% since Friday, when the floodgate of debate surrounding the potential exit of the U.K. from the European Union burst open.

Investment houses have been warning that the pound could drop sharply if U.K. voters support leaving the EU. Losses for the pound started picking up pace after London Mayor Boris Johnson over the weekend backed a campaign for the U.K. to leave the European Union.

Currencies don’t move in a “in a straight line forever,” said FxPro’s Smith. But at this point, “there is very little support between where we are now and the lows we saw in 2009.”

Hurdles: Johnson’s stance is “raising concerns that he could tilt the vote toward the ‘Leave’ camp,” said Vincent Chaigneau, head of rates and forex strategy at Société Générale.

The influential London mayor’s position puts him in direct opposition to David Cameron, his fellow Conservative Party member and party leader. On Friday, British Prime Minister Cameron struck a deal with the EU to change his country’s membership terms.

The U.K. government has set June 23 as the date for an in/out referendum on whether the U.K. should exit the EU, known as “Brexit.” While the “leave” camp is tapping into a range of dissatisfactions with the bloc in its campaign, the need to control borders in the face of the migrant crisis is a key issue.

“The deepening of the immigration crisis in Europe is going to be at the heart of the debate, and unfortunately it’s likely that as weather conditions improve into spring, we will see another wave of immigration,” said Chaigneau.

“There’s a concern that the immigration issue could make the vote very tight.”
.
HSBC believes the currency market is pricing a Brexit at around a 33% probability, the bank’s analysts said in a report published Wednesday. “So GBP-USD could fall by around another 15-20% should a Brexit become a reality — in other words, if the probability shifted from 33% to 100%,” wrote currency strategist Dominic Bunning and David Bloom, global head of FX research at HSBC.

To summarize, anyone holding a lot of British pounds is sorry they made that choice, and a growing number of them are behaving as people have behaved for 3,000 years, retreating into the one safe haven that offers reliable shelter from government mismanagement. In the past three months (that is, since the Brexit debate has emerged) gold is up 22% in pound terms, and the ascent is steepening. As the article notes, warmer weather will bring more immigrants, sharpening the debate and keeping the outcome of the outcome in doubt — and making gold ever-more-attractive for Britons exhausted by the uncertainty.

By John Rubino

dollarcollapse.com

Copyright 2016 © John Rubino - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife