GOLD PRICES leapt at their fastest-ever pace against the British Pound in Asian trade Friday as the UK’s referendum on membership of the European Union showed a 52% vote in favor of leaving.
Pro-Remain prime minister David Cameron resigned. Anti-EU UKIP party leader Nigel Farage called for 23 June to become a national holiday – “Independence Day” – and said other EU member states led by the Netherlands and Austria could follow.
Global stock markets tumbled, with UK banking and home-building shares losing up to 55% at the start of London trade.
Marking a $100 range and spiking by 4am London time to $1358 per ounce – a new 2-year high – the gold price in Dollars then retreated to last week’s peak at $1315.
Gold prices for UK investors jumped 22% overnight as the Pound sank to three-decade lows on the FX market, touching a 3-year high at £1019 before also retreating, down to £953 per ounce.
“It is now highly likely that the Fed will be unable to hike rates this year,” said ICBC Standard Bank precious metals strategist Tom Kendall.
Besides the likely move to new QE and lower rates from other major nations, “That alone will be supportive of gold.”
“Inevitably…some market and economic volatility can be expected as [the Brexit] process unfolds,” said Bank of England governor Mark Carney in a statement.
“[The Bank] stands ready to provide more than £250bn of additional funds through its normal facilities.
“[But] there will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold.”
“Other safe haven assets have also done well on investor risk aversion,” says Jonathan Butler at Japanese conglomerate Mitsubishi, pointing to the Japanese Yen hitting near-2 year highs versus the Dollar and rising US Treasury bond prices pushing 10-year yields to new 4-year lows.
Ten-year UK Gilt yields fell 0.28 percentage points to new record lows near 1% per year.
Crude oil dropped almost 4%.
“There are some caveats” for gold prices warns Kendall at ICBC Standard Bank.
“The strengthening Dollar will be something of a headwind; speculative positions on Comex are already at record levels; short-term volatility will keep many bullion dealers and jewellery buyers on the sidelines for now.
“Producer hedging will become increasingly attractive.”
Silver prices also jumped to 2-year Dollar highs above $18.30 per ounce overnight, but lagged gold’s sharper gain.