Some new financial heavy hitters have come out of the woodwork to emphasize that a Brexit could devastate various aspects of the British, European, and even global economies.
Billionaire George Soros penned a column in Londons Guardian newspaper predicting that a vote to leave could see the week end with a Black Friday, and serious consequences for ordinary people.
And famed British banking scion Lord Jacob Rothschild has warned that a Brexit would be damaging and disorderly, while New York University economist Nouriel Roubini said the United Kingdom would suffer significant damage.
SocGen predicts 10% gold advance: And given these projected negative economic consequences, gold would be a likely beneficiary of Brexit. Thats why one banking giant that has been a longtime bear on the precious metal is forecasting a significant move higher in the gold price if the Brexit backers prevail.
In the event of Brexit, we expect gold to move 10% higher and volatility to increase significantly, Societe Generale analysts wrote. The heightened market uncertainty in the run-up to the vote will prompt investors to seek safe-haven assets, benefiting gold and the rest of the precious metals.
A 10% increase would take gold above the $1,400 level. Thats quite a forecast given SocGens recent dislike of gold. As Bloomberg metals analyst Eddie van der Walt tweeted, Bears SocGen say gold could go to $1,400 on Brexit. Thats like anyone else saying $1,700.
All of the problems are here to stay: But as another SocGen analyst notes, even if the Brexit measure is defeated, problems remain for the global economy that will keep golds safe-haven qualities in high demand.
Whatever the outcome of the Brexit vote this week, investors will still be facing the prospect of negative rates and negative yields on a huge range of bonds, massive corporate leverage with worryingly rising delinquencies and of course expensive equity markets and falling profits, Andrew Lapthone wrote. To that extent these political events are a distraction from the main event, weak global economic growth and perverse asset markets. So whilst the market preference for the status quo might be celebrated in the short-term, actually when the fog clears, all of the problems will still be there.
And those problems also exist in the U.S. As Bill Bonner succinctly put it, Industrial production has been falling for nine months in a row. Factory orders have been going down for the past 18 months. Commercial bankruptcies are rising. And tax receipts are beginning to fall, as they typically do before a recession.
More than $10 trillion of government bonds now trade at negative yields. And another $10 trillion or so worth of U.S. stocks trade well above their long-term average valuations.
And theres more than $200 trillion of debt in the world with about $60 trillion added since the global financial crisis.
Is Brexit paranoia just noise?: This litany of problems is one reason why Barry Dawes of Paradigm Securities just told CNBC that the yellow metal is bound for new 2016 highs regardless of the UK referendums outcome. There are other forces that are affecting the gold price, Dawes said. I just see this Brexit issue as just noise. Its not a major issue. Some people have made it out to be a lot more than I really think it is. The gold price was moving up quite nicely early in the year long before this Brexit issue really came to the fore, so sure, well see a little volatility. We got up to that sort of $1,350 which was my target from earlier in the year, and I think weve probably got a little bit more consolidation before we go and then I think its going to be up, and well certainly see $1,400 on my models this year, and it could be a lot higher than that.