Direxion Shares Exchange Traded Fund Trust might see a swing into an uptrend today because investors are buying physical gold in UK . The yellow metal is recording a sharp increase in the demand among buyers in Europe ahead of the Brexit vote holding tomorrow. Tomorrow, UK will hold a referendum on whether to leave or stay in the EU as a member nation.
The prevailing idea in the market is that the exit of Britain from the EU could trigger a financial apocalypse in Euro zone. As expected, many people consider gold as a secure and stable investment during times of economic and geopolitical turbulence. Hence, many people are buying up physical quantities of the bullion in order to stay safe.
Fears of Brexit is pushing demand for physical gold
The Telegraph reports that worried savers have started piling up the bullion and keeping it in safes in their homes. Google searches for the query “home safe” has increase by 61% over the volume search during the height of the financial crisis in November 2008.
Laith Khalaf senior analyst at Hargreaves Lansdown observes that the bullion “been a popular choice recently as markets have been worrying about the prospects of global economy, and gold works as a store of value, and a hedge against catastrophe.” However, experts think that the frenzy to buy and store gold bars at home is not smart and that investors would be better served if they buy funds such as Direxion Shares Exchange Traded Fund Trust .
Ben Yearsley, investment director at Wealth Club notes that bullion bars “are very poor value for money and you run the risk of losing them or having them stolen at home. If you’re going to buy precious metal you might as well buy a bullion or silver investment fund, where you will get much better value for money due to economies of scale.”
Gold will rise irrespective of how Britain votes
Gold settled at $1,272 on Tuesday in sharp contrast to the $100 gains that led the bullion to a high of $1,318.90 earlier in the month. The weakness in the yellow metal yesterday can be linked to the fact that bookmakers are starting to put the odds on a Bremain. However, some analysts have noted that the bullion and other ETFs such as the Direxion Shares Exchange Traded Fund Trust will rise, irrespective Britain leaves or stay in the EU.
The analysts noted that a Brexit would favor gold as expected because the exit of Britain from the EU will increase financial turbulence in the Eurozone. However, if Britain chooses to stay in the EU, the Pound will be strengthened against the U.S. dollar. Interestingly, a weakness in the greenback usually leads to an increase in the demand for the bullion.
Rich Ross, head of technical analysis at Evercore ISI notes that “I think that gold works whether we get that Brexit and chaos ensues [in which case] gold goes higher — or if peace prevails on the ‘Bremain,’ the dollar eases, providing a bid into gold, commodities and high yield”. However, bulls are pinning for a Brexit in order to record a faster pace in the bullish ascent of the yellow metal. Mark Keenan an analyst in Asia says “We expect gold to jump 10 percent in the event of a Brexit… forecasting a rally to $1,400 an ounce. “