Gold gains as Investors seek refuge in bullion market after Brexit vote

London, United Kingdom Published: Jun 28, 2016, 05:41 AM(IST)

Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna Photograph:( Reuters )

Gold rose on Monday, staying close to more than two-year high hit on Friday, as uncertainty over Britain's vote to leave the European Union (EU) pushed investors to sell equities and seek safer assets.

Bullion finished Friday up 4.8 per cent, its biggest one-day gain since January 2009 as the British vote sparked sales of riskier assets. Gold is often perceived as a hedge against economic and financial risk.

"The short-term tactical gold buying of highly speculative flows has a history of being not sustainable, but there are also longer-term investors in this rally, who worry about contagion and ramifications in other markets and parts of the world," Sharps Pixley chief Ross Norman said.

Spot gold rose as much as 1.5 per cent to a session high of $1,335.30 an ounce and was up 0.8 per cent at $1,326.26 by 3:16 p.m. EDT (1916 GMT). It rallied 8 per cent to $1,358.20 at one stage on Friday, the highest price since March 2014. 

U.S. gold futures settled up $2.30, or 0.2 per cent, at $1,324.70 per ounce. 

Britain's shock vote to leave the EU roiled global markets for a second day, hammering US and European banks, lifting bond prices and dragging the British Pound to a 31-year low. 

"The uncertainty around the timing of negotiations to leave the EU means that not only do investors become more defensive and buy things like gold and the dollar, but it also keeps sterling under pressure and translates into a permanent loss of economic activity at domestic level," ETF Securities analyst Martin Arnold said.

The British referendum verdict probably means the Fed's ambitions for two rate rises this year have been placed on hold, analysts and experts said.

Goldman Sachs has raised its gold price forecasts saying Brexit suggested a more sustainable impact on the trajectory of U.S. interest rates.

UBS Wealth Management Research raised its three-month price forecast for gold to $1,275-$1,425 per ounce and 12-month to $1,275, on uncertainties following the UK vote and its expectation for just one Fed rate hike this year.

"Central bank readiness to provide additional monetary support if needed should support gold's short-term appeal," UBS said.

Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, jumped 2 per cent on Friday to the highest since July 2013.

Spot silver rose 0.1 per cent at $17.67 per ounce. Platinum was down 0.2 per cent at $979 an ounce and palladium was up 1.7 per cent at $556.10.


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