The Increasing Likelihood of Brexit
June 13, 2016
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
The Yen and “Dollars’” rule on the forex market this morning as the tragic events that took place in Orlando yesterday play out in global terms as capital is fleeing to where it feels safest and that means geography and military power trump all other concerns. Add into this mix the latest polls out of Europe suggesting that the British are prepared now to leave the European Union and one has the makings of a rout to the downside for Sterling and the EUR, while one has the making for rush into Japan and “dollars” far removed from the political uncertainty of Europe at the moment. Concerning the impending referendum in the UK, the latest poll by the influential ORB polling organization taken early last week and released on Friday showed that 55% of those polled now favour “Leaving” the European Union and that only 45% wish to remain. The ORB’s previous poll taken back in mid-April had 51% in favor of leaving the Union and 49% in favor of staying and what is important about the ORB poll is that it “weights” the numbers according to its perceived likelihood of those polled to actually vote. Further, what is interesting is the size of the swing from a year ago when the ORB poll has those intending to “remain” within the Union leading those who were intending to “Leave” by 10 points! This is a huge shift in sentiment in the course of one year.
Further, ORB notes that when they’ve taken their weightings for the propensity of those being polled to actually vote in the referendum next week, those favoring “Leaving still led 53-47. Further still, as we have suggested, the propensity on the part of those favoring “Leaving” to actually go to the polls to vote is materially stronger than is that of those favoring “Remaining.” The ORB pollsters suggest that 78% of those polled who are “Leavers” will go to the polls while only 66% of those favoring “remaining” shall do so.
Owning gold has served us well and as we write Gold/US$ is putting $1280 to test from below. We shall sit tight, concerned only in that gold mining shares performed rather poorly on Friday and on balance the miners in a bull market outperform bullion almost always. When the miners under-perform our antennae are raised. We may not act upon those raised antennae, but some attention must be paid.