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, sending investors scurrying for protection in bullion and other assets perceived as lower risk.
In sterling terms, gold delivered double-digit percentage gains to top 1,000 pounds an ounce for the first time in more than three years, rallying as much as 21 percent in early trade, while euro-priced gold rose as much as 13 percent.
Spot gold peaked at $1,358.20 per ounce and was up 4.76 percent at $1,315 an ounce, while U.S. gold futures for August delivery were up $56.70 an ounce at $1,319.80 off an early high of $1,362.60 an ounce.
Shares of gold mining companies also rocketed higher, with a fund tracking the industry opening nearly 8 percent higher.
“(Brexit) benefits gold because in a general risk-off mode, it’s a natural safe haven for everybody,” Marie Owens Thomsen, chief economist at Indosuez Wealth Management, said.
“Now that the UK has voted to leave, we think there’s a higher probability that the $1,350-1,360 per ounce level can be breached, and we’re therefore looking for an extended target in the $1,400s.”
Gold priced in sterling was last at 965.80 pounds an ounce, up 14.5 percent, having peaked at 1,019.03 pounds overnight. Euro-denominated gold was up 9.5 percent at 1,195.20 euros an ounce, off a high of 1,244.34 euros.
Gold dealers in London reported surging demand for coins and bars among retail investors on Friday, with some saying stocks were tight.
Britain’s vote to leave the European Union forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War Two.
World stocks headed for one the biggest slumps on record as the vote triggered 8 percent falls for Europe’s biggest bourses and a record plunge for sterling.
The single currency was under pressure as investors worried that the Brexit vote could encourage similar movements in other European countries.
U.S. short-term interest rates futures hit contract highs in early U.S. trading, 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,” Amanda van Dyke, fund manager at Peterhouse Asset Management, said.
“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.”
Disclaimer © 2010 Junior Gold Report
Junior Gold Report’ Newsletter: Junior Gold Report’s Newsletter is published as a copyright publication of Junior Gold Report (JGR). No Guarantee as to Content: Although JGR attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. JGR, its associates, authors, and affiliates are not responsible for errors or omissions.
Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report does not take responsibility for accuracy of forward looking statements and advises the reader to perform own due diligence on forward looking numbers or statements.