Amid the horror for many, the elation for others and the shock for virtually everybody of the British vote to exit the European Union, perhaps the most measured and predictable response was from commodity markets.
As it became clear on Friday that the Leave camp was going to pull off an unexpected victory, commodities did what they normally do in a period of heightened risk, they declined.
The outlier of course was gold, which also did exactly what it was expected to do by rallying strongly as investors sought the protection of what is still viewed by many as the ultimate safe-haven in times of crisis and uncertainty.
The gain in spot gold was a strong 4.6 per cent from the close on Thursday to the close on Friday, reflecting the scale of the shock of the British vote, commonly referred to as Brexit.
Brent crude oil declined 4.9 per cent from Thursday to Friday, meaning its drop was of a similar magnitude to the rise in gold.
While it’s sometimes difficult for people to take a stand-back view of a tumultuous event, it’s probably the case that while the moves in gold and crude oil were certainly large, they were by no means signs of a panicked market.
For example, Brent had a bigger one-day percentage drop as recently as Feb. 9 this year, when it slumped 7.8 percent amid investor concern over a supply glut in global markets.
Gold’s rally on Friday was less than half the almost 11 per cent jump from Sept. 17, 2008, when investors flooded into the yellow metal at the height of the equity rout during the global financial crisis.
These examples in no way seek to minimise the impact of the Brexit vote on commodity markets, rather they aim to provide context that while the price action is significant, it wasn’t exceptional or without precedent.