Brexit fallout could send gold to record highs, Blanchard CEO says
The Brexit proposals victory last week took the world by surprise. After all, the yellow metal had to wind knocked out of its advance after British Parliament member Jo Cox was killed June 16 by an assailant with history of mental illness, and polls were suggesting that the Remain camp would prevail.
That didnt happen, and the latest shoe to drop is the UKs credit rating, which Standard & Poors just downgraded to AA with a negative rating, while Fitch slashed it from AA+ to AA. And now financial-news organizations are scrambling to make sense of this surprising turn of events. To that end, with the gold price surging well above $1,300, some have turned to Blanchard and Company CEO David Beahm for answers.
Biggest event since Lehman: In a June 26 article headlined Why gold may hit $1,500 by years end and its not just about Brexit, Beahm told MarketWatch metals reporter Myra Saefong: The markets fearful reaction has made Brexit the most stressful event investors have seen since the Lehman Brothers bankruptcy in September 2008. This is a major negative for global markets, and gold is positioned for long-term price growth because of ... the Brexit vote and other negative global financial conditions.
Beahm added that central banks like the Federal Reserve and the ECB have little ammunition left to fight the deflationary forces ignited by Brexit. They will have to turn to other extraordinary means to keep markets calm and provide necessary liquidity to keep the financial system from stalling, he said.
EU chaos could drive gold to record: And in a June 27 article at CNN titled Gold may be the biggest Brexit winner, Beahm predicted that the Brexits approval could spark a succession of falling dominoes as more disgruntled nations push to leave the European Union. That in turn could spark gold much, much higher.
Gold could test the highs of a few years ago due to the fears of all this uncertainty, Beahm said. The European Union may cease to exist. That all-time nominal high above $1,900 was reached, of course, in September 2011, in the aftermath of the historic downgrade of the U.S. credit rating by Standard & Poors rating agency. But in real terms, gold would have to top at least $2,000 to best its 1980 peak of $850. So bullions full bullish potential still has a long way to go.
Blanchard isnt just talking its own book or advising clients to put all their money into gold. The key to surviving these uncertain times is diversification across a range of assets including stocks, bonds, real estate, and cash in addition to hard assets such as gold and silver bullion plus rare coins. Never put all your eggs into one basket.