Gold races to highest in over 2 years after Britain votes to leave EU

By: | Published: June 24, 2016 2:17 PM

Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, leaving investors to seek protection in the precious metal.

gold sharesGold delivered double-digit percentage gains in sterling terms, topping 1,000 pounds an ounce for the first time in more than three years, while gold priced in euros rallied as much as 13 per cent. (Reuters)

Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, leaving investors to seek protection in the precious metal.

Gold delivered double-digit percentage gains in sterling terms, topping 1,000 pounds an ounce for the first time in more than three years, while gold priced in euros rallied as much as 13 percent.

The metal pulled back from early highs however as the dollar, in which it is priced, headed for its biggest daily gain since 1978 against a currency basket, but remained elevated.

Spot gold peaked at $1,358.20 per ounce and was up 4.5 percent at $1,313 an ounce at 0753 GMT, while US gold futures for August delivery were up $59.40 an ounce at $1,322.50, off an early high of $1,362.60 an ounce.

Gold priced in sterling was at 958.68 pounds an ounce, up 13.6 percent, having peaked at 1,019.03 pounds overnight. Euro-denominated gold was up 7.7 percent at 1,187.70 euros an ounce, off a high of 1,244.34 euros.

Spot prices, already boosted by fading expectations for a U.S. rate hike, are now up 25 percent this year.

“All we needed was Brexit to get this next leg up for gold,” Willem Middelkoop, founder of Netherlands-based Commodity Discovery Fund, said. “Overnight all this energy has made gold explode. It was a $100 move from the bottom to the high just in a few hours, and that’s quite unprecedented.”

MARKET STORM

Britain has voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow to the European project of greater unity since World War Two

The Bank of England said on Friday it would take all necessary steps to shield Britain’s economy from the shock decision, having “undertaken extensive contingency planning” for the vote.

Currency markets saw huge swings, with sterling hitting its lowest in three decades in its most volatile session in living memory, while the dollar leapt 3 percent against the euro.

The single currency was under pressure against most other currencies as investors worried that the Brexit vote could spark anti-establishment movements in other European countries.

US short-term interest rates futures hit contract highs in early US trading after Britain voted to quit the EU, boosting expectations the Federal Reserve may cut interest rates to help shield the economy from any global fallout.

“This isn’t necessarily about Britain, it’s about uncertainty in the world’s largest economy,” said Amanda van Dyke, fund manager at Peterhouse Asset Management.

“The general commentators are suggesting that the Fed is no longer going to raise rates because the dollar is soaring, and they can no longer afford for the dollar to keep going as fast as it is.”

“Realistically, the ability of the European market to speak with a common voice I think has been permanently severed, and that’s going to be a solid 5 percent (price increase) in gold for at least the next couple of years.”

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