Gold posts biggest rally since 2008 on shock Brexit vote

MANILA/BENGALURU (Reuters) - Gold soared the most since the global financial crisis in 2008 on Friday, after Britons shocked markets by voting to leave the European Union, fueling market turmoil that drove investors toward safe-haven assets.

Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger

The precious metal jumped as much as 8 percent to its highest in more than two years, tracking the rally in other safe havens, such as bonds, as risky assets were dumped from stocks to sterling.

Complete results from a British referendum showed a near 52-48 percent split for the UK leaving the EU. The vote created the biggest global financial shock since the 2008 crisis, this time with interest rates around the world already at or near zero, stripping policymakers of the means to fight it.

Spot gold was up 5.1 percent at $1,319.60 an ounce by 0639 GMT, after earlier peaking at $1,358.20, the strongest since March 2014. Gold soared nearly 11 percent in September 2008.

Britain would be the first country to leave the European Union, the biggest blow to the 28-nation bloc since its foundation. Some analysts say that could tip Europe back into a recession, piling more pressure on the global economy, and burnishing the appetite for gold.

“It’s certainly going to retard the kind of recovery momentum we’ve seen shaping up in Europe and for the UK it will probably negate a lot of the stimulus effects,” said Vishnu Varathan, a senior economist at Mizuho Bank.

U.S. gold for August delivery rose 4.7 percent to $1,322.80.

Gold could build on these gains if the resulting uncertainty in Europe “leads to an environment where the Federal Reserve is not going to hike rates so dramatically and everybody throws in more liquidity,” said Dominic Schnider of UBS Wealth Management in Hong Kong.

Before Friday’s new high, bullion also topped $1,300 on June 16 after the Fed signaled a less aggressive monetary tightening stance. Rate hikes increase the opportunity cost of holding the non-interest yielding metal.

Gold priced in other currencies also surged. In terms of sterling and euro, gold hit the highest since April 2013. In Australian dollar terms, gold touched a record high.

Gold on the Shanghai Futures Exchange climbed to the highest since September 2013. Trading volumes soared nearly three times normal levels, said Richard Xu, fund manager at HuaAn Asset Management, China’s top gold exchange-traded fund.

Brexit would “have repercussions not only on the currency markets but also on the political landscapes and that will have a lasting impact on economic growth assumptions,” said Xu, adding gold could hit around $1,600.

Spot silver was up 2.4 percent at $17.69 an ounce.

Platinum was up 1.4 percent at $973.75 and palladium dropped nearly 3 percent to $548.

Additional reporting by Koustav Samanta in Bengaluru and James Regan in Sydney; Editing by Ed Davies