• 4 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 5 days How To Invest In The Cybersecurity Boom
  • 7 days Investors Are Patient With Unprofitable Giants
  • 9 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 11 days 5 Stocks To Keep A Close Eye On This Year
  • 12 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 13 days Central America Is Ready For The Bitcoin Hustle
  • 15 days China’s Video Game Restrictions Unlikely To Slow Down Booming Industry
  • 16 days Top Performing Stocks As Inflation Fears Grow
  • 17 days US Airline Stocks Take A Beating On New EU Restrictions
  • 18 days This IPO Could Open Sustainable Fashion Floodgates
  • 19 days Crypto Crime Nets Another $2B Fraudster
  • 21 days This Week’s Hottest Meme Stocks
  • 22 days Why World Markets Should Be Watching Germany Closely
  • 24 days Could ‘Cultured’ Meat Rival The Plant-Based Megatrend?
  • 26 days ‘Easy Money’: Crypto Is Still Attracting Newbie Investors
  • 28 days Foreign Syndicates May Have Stolen Up To $400B In COVID Benefits
  • 29 days Gold Jumps Above $1800 Ahead Of Jackson Hole Summit
  • 29 days International Banks Blacklist Afghanistan Following Taliban Takeover
  • 31 days China’s Tycoons Are Getting A Serious Reality Check
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

BREXIT and Silver

If it escaped your notice, there is the small matter of British citizens voting on whether to leave or remain within the European Union on the 23rd June. Being a British citizen (or is that a British subject), I have a vote to cast which requires some thought. However, one other thought is the effect a "Brexit" would have on silver as measured in Pounds Sterling.

Now, Britain does have its fair share of silver investors, who will see silver as an investment opportunity, or perhaps a bulwark against a currency that is subject to the same predations as any other fiat currency. The silver story in British Pounds is pretty much the same as the one for US Dollars as the monthly chart (courtesy of netdania.com) shows.

Silver/GBP Monthly Chart

From a low of about £2.70 per troy ounce in 2003, silver peaked at £30.14 in April 2011. That is an 11.2 fold increase compared to an 11.6 fold increase for silver priced in US Dollars over the same term. If the silver bull of 2003-2011 was just about the dollar, the pound shows it was actually more about fiat money versus real money in general.

But is the Brexit threat feeding its way into the British market for silver? A look at the daily chart since December 2015 shows that, once again, British silver is enjoying the same bull run as its American counterpart.

Silver/GBP Daily Chart

The percentage increases are similar, but a closer analysis shows that Brexit may be having its effect. For this, we call up a weekly chart which shows the British price of silver relative to the US price and the Dollar/Pound exchange rate since October 2013. So, the percentage scale to the right tells us where each instrument is relative to that starting date. As you can see, they are all down relative to that date.

Silver/GBP Weekly Chart

So the top blue line is the relative Pound/Dollar exchange rate, the black line is the relative price of silver in Pounds and the bottom green line is the relative price of silver in Dollars. The first thing to notice is how silver in dollars is generally outperforming silver in pounds until about November 2014 after which the black line of silver in pounds goes above the green dollar line and stays that way.

Secondly, note the gap between the two silver lines widens into this year as the pound begins to devalue against silver such that the current gap between silver in £s and silver in $s is now 5.99%. While this was going on, the drop in the $/£ exchange rate over the same time was 6.59% for a small 0.6% difference.

In other words, British holders of silver are seeing their investment act as a wealth preserver against pound devaluation. I would say that this is exactly what one would expect to see from silver. The question is now whether a vote to leave the European Union will see silver in pounds race to new highs and transform British silver from wealth preservation to wealth appreciation? If the British vote to leave the EU on Thursday, we'll see if this unfolds into next week.

 


Further analysis of silver can be had by going to our silver blog at http://silveranalyst.blogspot.com where readers can obtain subscription details for the Silver Analyst newsletter. A free sample copy can be obtained by emailing silveranalysis@yahoo.co.uk.

 

Back to homepage

Leave a comment

Leave a comment