Brexit: gold soars as investors flee to safety following shock decision

Cash looks for sanctuary as leave vote puts investors into a panic.

All times UAE

The decision by the United Kingdom to leave the European union sent shockwaves across global markest and stunned investors moved fast to seek sanctuary elsewhere, causing gold to surge.

Below is a timeline of events as the result became clear.

1.45pm

Gold soared to a two-year high as bullion jumped as much as 8.1 per cent, the most since the height of the global financial crisis in 2008, before paring some of the gain, while futures trading volume was seven times the average for this time of day. As the pound tumbled against the dollar, gold priced in sterling rallied as much as 19 per cent and gold mining companies such as Randgold Resources advanced.

“The volume we saw last night was unmatched by anything, and we’re nowhere near done,” said Naeem Aslam, the chief market analyst at London brokerage TF Global Markets. “The phone’s been off the hook all night. We were around the news wires nonstop.”

Some clients were frustrated that they could not get orders completed quick enough as trades kept being upended by other large positions coming in, Aslam said, as he stepped out of the office for a coffee after working overnight. He said he’s planning to work over the weekend to meet the surge in business.

Gold for immediate delivery climbed 4.7 per cent to US$1,315.32 an ounce by 9:28am. in London, according to Bloomberg generic pricing. Société Générale said in a note this week that gold could hit $1,400 in the event of a Brexit.

The metal is up 24 per cent this year as expectations that the US Federal Reserve will keep interest rates low weakened the dollar. The US central bank will be even more likely to keep rates on hold following the result of the UK referendum, according to Saxo Bank and ICBC Standard Bank.

European gold dealers saw a rush for physical metal, with CoinInvest.com saying it had a record number of UK customers interested in buying. Daniel Marburger, a director at the Frankfurt-based firm, said Britannia and Sovereign coins from the UK’s Royal Mint were the best sellers in the early hours. ABC Bullion, a Sydney-based trader, said new account openings on Friday matched the whole of a normal week.

“There’s a lot of fragility out there politically and economically,” said Jordan Eliseo, the chief economist at ABC Bullion. “It’s a more difficult time for investors and safe-haven assets are the way to go.”

GoldCore, a brokerage in Dublin, experienced record online sales for the time of day and may have to restrict trading to existing clients if demand remains high, said the director Mark O’Byrne.

Gold mining stocks jumped. Randgold Resources climbed as much as 29 per cent, the most ever, and was last up 15 per cent. Fresnillo advanced 11 per cent and the two companies were the biggest gainers in the UK’s FTSE 100 Index.

11.15am

Gold prices surged Friday to the highest level in more than two years following Britain’s shock decision to leave the European Union.

The precious metal spiked as high as US$1,359.08 per ounce – the highest level since March 19, 2014 – before settling at $1,318.80 around 0650 GMT.

Investors flocked to the traditional haven investment on fears over the global fallout from Britain’s decision to withdraw from the 28-nation EU blocn.

“Gold is soaring as investors flock to relative safety,” said Joe Rundle, the head of trading at ETX Capital in London.

Investors had been wrong-footed by the vote outcome after opinion polls and bookmakers had pointed Thursday to a victory for “Remain” campaigners.

“Leave’s victory has delivered one of the biggest market shocks of all time,” added Mr Rundle.

“The reverberations of the vote will be felt around the world. The extent of the damage on asset prices is hard to gauge but it’s likely to be bigger than anything since Lehmans at the very least,” he added, in reference to the US investment bank which collapsed during the 2008 global financial crisis.

“It’s fair to say we’ve never seen anything like it and the chances are markets will remain highly volatile over the coming hours and days,” said Mr Rundle.

Published: June 24, 2016 04:00 AM

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