Gold surges most in 2 years in panic buying after Brexit shock

PUBLISHED : Friday, 24 June, 2016, 10:20am
UPDATED : Saturday, 25 June, 2016, 6:13am

Gold surged on Friday to its highest level in more than two years, and posted its biggest daily gain since 2008, as shaken investors snapped up the safe haven asset amid fears of further market turmoil after Britain shocked the world by voting to leave the European Union.

Gold for immediate delivery jumped as much as 8.1 per cent to US$1,358.54 an oounce as the safe haven metal surged the most since the height of the 2008 global financial crisis. Futures for August delivery rose 4.7 percent to settle at $1,322.40, with trading volume three times the average.

Societe Generale had predicted the yellow metal could reach US$1,400 in the event of a Brexit.

Britain voted to leave the European Union on Thursday, causing Prime Minister David Cameron to resign mid-afternoon on Friday.

As the pound tumbled against the dollar, gold priced in sterling rallied as much as 19 per cent and mining companies such as Randgold Resources and Barrick Gold advanced.

The volume we saw last night was unmatched by anything, and we’re nowhere near done
Naeem Aslam, chief market analyst at London brokerage TF Global Markets

The metal is up 25 per cent this year as expectations that the Federal Reserve will keep interest rates low weakened the dollar.

“Safe havens have been surging,” said Angus Nicholson, an analyst at IG Group, noting that panicked investors are rushing to assets like gold, the Japanese yen, and bitcoins.

“Coordinated intervention by global central banks and G20 governments may be necessary to stem the sell-off.

“But when there is so much division in Europe it is difficult to see how they can come together and present a unified case that will reassure markets,” he said.

“The volume we saw last night was unmatched by anything, and we’re nowhere near done,” Naeem Aslam, chief market analyst at London brokerage TF Global Markets, told Bloomberg.

Mark Carney, the governor of the Bank of England, said the bank would take all necessary steps to ensure financial stability and pledged to provide £250 billion in funding to calm the situation.

Nicholson refused to rule out the possibility of other potential exits from the European trading bloc.

“Speculation in the markets will increasingly focus on the weakest links in the EU, those who are most likely to elect to leave and those who would suffer most under the breakup of the EU,” he said.

“The PIGS (Portugal, Italy, Greece, Spain) are likely to fall under the intense focus of speculators again. Spain has elections on June 26, and this Brexit vote will likely have a major influence on its outcome.”

In the meantime, oil prices fell sharply. West Texas Intermediate fell 4.9 per cent to settle at $47.64. Brent crude futures slumped as much as 6.6 per cent.