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Friday, October 21, 2016

The Exodus of Britain from the European Union will break world markets

World markets immediately reacted to the unexpected results of the British referendum. Protective assets such as gold, went up, risk (oil) down. But after a few hours the situation has changed: oil prices began to rise in price, and gold cheaper. So wait for the financial tsunami in the world because of a British exit from the EU is not.

photo: morguefile.com

No wonder that night as the first results of the referendum from midnight until six in the morning, gold shot up in price from $1250 per Troy ounce (33.3 grams) to $1350. However, five years ago, she gave more than $2 thousand.

The current rise in gold prices is not accidental. It was for all the world’s investors a “safe haven”. Well-known global investment speculator George Soros at the beginning of the year started to invest in gold options, assuming that the current referendum will end exactly how it ended.

In General, the exit of Britain from the Eurozone may in fact lead to a slowdown in the world economy. However, it’s not so bad. The fact that it will force US to take an even slower pace in the future interest rates, and a longer period of low interest rates will support gold. And including oil prices that will have a positive impact on the growth of the Russian economy.

However, by the afternoon the first shock passed, and the financial markets began a movement in the opposite direction. Correction is not bypassed, and gold, which by noon had dropped to $1315 per Troy ounce, which corresponds to the maximum prices last week. It is highly likely that all the positive from the gold referendum has already played nightfall, and further strong growth rates in the near future should not wait. Euro and British pound partially restored its positions to the dollar.

Unlike gold, which acted as a “refuge” for investors, oil the prospects of slowing global economic growth have responded fall from $51,15 to $47.5 per barrel for Brent, but later partially regained lost ground, rising to $48.4 per.

As for currencies, the EUR/USD pair fell from midnight to six in the morning with up to 1,142 1,091, updating the lows since early March. However, quickly after the success of British eurosceptics, she began to recover and by noon it was already trading near the level of 1,112.

The Russian economy happened almost non-existent, but completely avoid the reaction to the incident the Russian market failed. Euro on the Moscow stock exchange was traded near the levels of yesterday, at 72,3–72,9 RUB the Dollar in early trading rose sharply to 66 RUB, but then decreased to 65.5 rubles

Clearly ordinary citizens do not buy or sell foreign currency. Those courses that are now established are the result of high volatility of the currency market.

Vadim Iosub,

senior analyst at Alpari.

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