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Optimistic Investors Sell UK Debt

Author: Ian Davis - Bullion Manager

Published: 8 Mar 2019

Last Updated: 14 Mar 2019

Investors in the city are full of optimism following the PM’s announcement that no-deal could be voted off the table. This has led to a recent high on trading floors triggering the biggest sell off for UK bonds since September 2017.

Imagine how much positivity will ensue if either a) the Brexit deal is accepted or b) the deadline is extended. The benchmark gilt yield moved 16.4 basis points across last weekend and into Monday. This shift away from classic “safe-haven” assets has also been recorded in the US and German markets. Goldman Sachs reported similar, as domestic UK stock indexes performed well and they even give a 90% chance of a Brexit "success". Essentially, they believe the Brexit deal will be approved or the divorce deadline will be extended both of which avoid a no-deal which would be cause for major concern for businesses. 

The result of this optimism is that investors ditch sovereign bonds (and even precious metals) in search of returns in equities and currencies. This can be observed in the value of the pound which has seen a rally of late but bullish investors could be pushing the value beyond the norm. Most analysts remain sceptical about the pound and conclude that Brexit will have a short and medium-term negative effect. 

Even with the high rates of debt disposal we have not experienced a let up in gold buying here at Chards, quite the contrary. Our showroom has been as busy as ever over the last few days spurred on by low gold prices mainly as a result of the strengthening pound. The buying frenzy found some pace as gold dropped below the £1000 mark which many may have set as a buying point. Since this however, the price of the pound has dropped, gold prices stabilised and even today we have seen positive gains in both gold and silver. We have previously reported how volatile the gold price is (in GBP at least) with Brexit chit chat rather than the economic reality.

Today we have already seen gold gain 1.09% and we expect uncertainty to continue up to the vote on the 12th March. So what do you think? Will gold continue to rise in the face of the unknown?

You may wish to read more articles in our market news section. 

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