Four winners to emerge from Brexit
1. Gold investors
The day after the referendum, gold jumped nearly 5% and since then has held above $1,300 an ounce, helping to achieve its best first half of the year since 1974. The yellow metal, which has historically been sought by investors during times of political and economic uncertainty, is also strengthening now that a U.S. interest rate hike seems less and less likely post-Brexit.
Markets, in fact, seem to have completely shed any belief that the Federal Reserve will raise rates this year. Bets that rates will be cut by September spiked before retreating, while bets that they would be left untouched surged 48.6%.
This bodes well for gold, which has traditionally shared an inverse relationship with interest rates. When savings account rates and yields on government bonds are low, gold suddenly becomes much more attractive to hold as a store of value.
This is especially true in countries where rates are negative. The yield on the German 10-year Bund recently fell below zero, and the Swiss 30-year government bond yield turned negative, in effect charging investors for the privilege of holding their cash.
But American investors aren’t immune. Last Friday, the yield on the 10-year Treasury fell to as low as 1.385%, an all-time record.
Across the pond, British rates are likely to be slashed this summer, according to Bank of England Governor Mark Carney. In response, Britain’s FTSE 100 Index roared up to a 10-month high, erasing all Brexit-inflicted losses.