On Friday, as markets collapsed around the world after Britain voted to leave the European Union, investors in one kind of asset did fabulously: owners of gold.
The precious metal saw a huge one-day price jump, increasing in value by $59.30, or 4.7 percent, to $1,322.40 per ounce, a two-year high.
Adrian Ash, head of research at BullionVault, a London-based gold-and-silver online exchange, said trading volume was extraordinary. In fact, there was as much trading activity by 2 p.m. London time (9 a.m. Eastern time) as the exchange usually does in two weeks.
The strength of gold reflected market uncertainty. Gold tends to gain value in times of anxiety, because traders see it as a safe place to store assets that isn't vulnerable to shifts in the value of currency. Some experts are dismissive of gold because it is — after all — just a shiny metal, but many investors still assign a symbolic value and treat it as a beacon of stability.
“In a world of uncertainty, gold never changes,” Ash said. “Gold doesn’t do anything; it doesn’t even rust. It’s absolutely certain in a world of constantly changing values, constantly changing politics and constantly changing risk.”
“It’s a tried and true safe haven,” added HSBC Securities commodities analyst Jim Steel.
Others argue that it's simply a bad investment. While equity markets have enjoyed healthy gains in recent years, gold has done poorly until recently.
Warren Buffett famously rebuked gold investment in a 2011 letter to shareholders. He wrote that many gold investors don't buy it because it's a productive asset, but because they think people will someday want gold.
"True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production," Buffett wrote. "Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end."
While it has had its ups and downs over the years, gold’s value steadily climbed from the mid-1990s through the global financial crisis and into the early years of the economic recovery. Gold peaked in August 2011 at $1,833 per ounce, and then it slowly decreased in 2013 and 2014. During that period, investors were increasingly confident in other assets — like stocks and oil — and found less reason for the stability of gold. In addition, gold seemed less relevant in an era of extraordinarily low inflation, which meant that currencies would hold on to their value.
Gold finally bottomed out in late 2015 at just above $1,000. It’s then climbed through this year as a result, in part, of global economic uncertainty hitting a high on Friday.
DailyFX currency strategist James Stanley argued that investors in gold Friday had made a wise decision. Currencies around the world — led by the pound — may lose value as the financial repercussions of Brexit reverberate. He said that investors in gold would be insulated from that.
“We’ve never seen an economy leave Europe,” Stanley said. “I think that investors need to remain very vigilant and very cautious right now. This is a time when investors need to look for a return of capital, not a return on capital.”