UK recession prompts spike in gold demand among investors, new data from The Royal Mint shows

by | Feb 19, 2024

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Following news of the UK economy entering a recession in the latter stages of 2023, The Royal Mint saw a 22% uplift in daily sales of gold last Thursday.

Commenting on the data, The Royal Mint’s Market Insights Analyst Stuart O’Reilly said: “The news of the UK economy falling into recession has clearly caused some investors to reassess their investment strategies and seek out a golden safe-haven for their wealth.

“We have seen a surge in gold demand as investors mulled the impact of a recession on interest rates and inflation. We are at a pivotal point in terms of central banks’ monetary policy. Before the news that the UK economy had shrunk, and despite some calls to cut interest rates to avoid a recession, many believed we were likely to see interest rates remain ‘higher for longer’. However, this news may increase the chance of an interest rate cut sooner than previously thought. This contrasts with US monetary policy, where US Federal Reserve officials seem decidedly hawkish. Any divergence in monetary policy and broader economic outlook between the US and UK could have significant impacts on the exchange rate, and gold demand..

 
 

“Lower interest rates are generally seen as positive for gold, reducing the opportunity costs of holding the yellow-metal over other ‘safe-haven’ assets. Gold also tends to perform well during periods of recession and economic uncertainty – seeing major price growth after the ‘Great Recession’ of 2008/09 and the recent COVID recession. 

“Investors are also factoring in heavy central bank gold buying, growing geopolitical risk, and emergent signs of turmoil in the banking sector in the US and China. In this context, gold carries significant upside potential.

“As the home of precious metals investing, we are seeing in real-time how gold and precious metals are increasingly becoming a go-to choice for investors looking to diversify their portfolio and hedge against risk. Last week, our Sovereign and Britannia gold bullion coin and bar investment products were the most popular investments among those looking to increase their allocation to precious metals or start their investing journey. Many are unaware that bullion coins from The Royal Mint are Capital Gains Tax-exempt for UK residents due to their status as legal British currency. This means those who have made gains from this week’s news and recent highs in gold prices will not pay tax on investment gains.”

 
 

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