UK Snap election drives consumers to gold market - British Royal Mint
Tue June 04 2024
Commodity analysts worldwide have been bullish on gold in part due to rising geopolitical uncertainty as nearly 50% of the world’s population heads to the polls.
Another country has been added to the list of more than 80 countries holding elections this year. Last month, UK Prime Minister Rishi Sunak called a snap election, with voters heading to the polls on July 4.
Analysts do not expect that the UK elections will have a significant impact on geopolitical uncertainty, driving safe-haven demand for gold; however, data from the British Royal Mint tells a slightly different story.
In a note published Monday, the Royal Mint said that bullion demand has increased since Sunak dropped the writ.
“Since the snap election was called, there has been a 49% increase in the number of customers buying precious metals bullion through The Royal Mint while the volume of gold purchases has doubled (up 117%) from the previous week. The Royal Mint’s bullion division has seen customer spending increase by 145% week-on-week while there has been a 10% uplift in first-time investors,” the mint said in a statement.
The report also noted that 49% of bullion buyers were between the ages of 44 and 59 years old. UK bullion demand appears to be bucking the broader trend, as research has shown that Generation X has the lowest interest in gold compared to older Baby Boomers and younger Millennials.
They said that physical investment products, including 1oz gold and silver Britannia coins, large gold bars, and sovereign coins, have proven to be particularly popular alongside The Royal Mint’s suite of digital products.
“The uplift in precious metals investing we have seen over the past week seems to have been driven by ‘safe-haven’ buying from investors who are attempting to mitigate the risks associated with the current uncertainty. Elections lead to increased questions around the future of the economy, tax, and security, which can cause spikes in investment activity and greater interest in precious metals,” Stuart O’Reilly, Insight Manager at the Royal Mint, said in the report. “Due to gold’s safe-haven status and lack of correlation with other assets, we tend to see surges in the buying of gold coins and bars when investors are uncertain about the future. In addition to the general election, investors are keeping a close eye on whether interest rates will come down and when that might happen, as well as looking ahead to America’s elections in November.”
UK markets have been highly sensitive to leadership turmoil in the British Parliament. Prime Minister Sunakcame to power in 2022, the third prime minister that year. He replaced Prime Minister Liz Truss, who roiled bond markets for three weeks after announcing a budget that proposed tax cuts and increased spending.
According to the latest poll, the UK Labour Party, led by Keir Starmer, is expected to win by a landslide.
Some analysts have said that the UK election, while important for Western democracy, is still a sideshow to this year's main event: the U.S. Presidential election.
So far, global financial markets have taken election results in stride. The results have had a limited impact on global economic sentiment.
Some of the highlights so far this year include Vladimir Putin’s landslide victory to a fifth term as President of Russia. The government said Putin won 87.28% of the vote and that turnout was the highest in history, at 74% of the electorate. However, the elections were widely condemned by the West as neither free nor fair.
In January, Taiwan elected Lai Ching-te president, leading the pro-sovereignty Democratic Progressive Party (DPP) to a historic third term in power, which angered Beijing. Since the election, China has taken a renewed hard line on Taiwan’s independence, adding to geopolitical uncertainty in Asia.
India has just wrapped up its weeks-long election, and while the ballots are still being counted, exit polls predict that Narendra Modi will remain the nation’s Prime Minister.
Source: https://www.kitco.com/