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Volatility presents opportunity in Brexit aftermath with record inflows into gold and short & leveraged products

According to Townsend Lansing, Head of ETCs at ETF Securities, as uncertainty following Brexit prevails, risk aversion is the dominant theme for investors...

Townsend Lansing, Head of ETCs at ETF Securities says that as uncertainty following Brexit prevails, risk aversion is the dominant theme for investors : “We have seen $279 million into our gold products since the Brexit result on Friday which brings our YTD figure into gold to $2.3 billion.”

“These are levels not witnessed since the height of the European debt crisis in 2012,” says Townsend.

However, unlike the quantitative easing era, when both longs and shorts in gold ETPs rose (indicating polarised investor views), Lansing highlights that the firm hasn’t seen any pick up in gold ETP shorts: “This suggests that despite the bullishness in gold, there is support for further upside in the gold price and we have upgraded our fair value to $1440.”

In equity markets, financial and industrial sectors have led benchmark indices on a volatile path lower in wake of the surprise outcome. The lack of clarity over the future of UK-EU relations is likely to create an abundance of tactical trading opportunities, he states: “As investors manoeuvre oscillations in the European equity market, we have seen a jump in the volume of trading in our leveraged equity product suite which has seen AUM climb by approximately 10% in recent days”.

Since the referendum result, broad FX market volatility has reached levels not experienced since 2012: “In the coming months, we expect that concerns over the future economic health of the European Union to encourage further shorting of GBP and EUR against perceived safe havens like the JPY, CHF and USD,” Lansing concluded.

Next Finance , July 2016

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