The gold lining amid dark clouds

ON Friday June 24, the British public voted to exit the European Union in a referendum now commonly known as "Brexit". It caused global equity markets to suffer the worst daily loss ever, erasing more than US$2 trillion of value in stocks, according to S&P Dow Jones Indices. The situation was similarly dire within the currency markets as the Sterling Pound plunged by 11 per cent against the US dollar (USD) while the euro dropped 4 per cent against the USD.

Against this backdrop of global economic uncertainty and turmoil from the referendum result, investors turned to traditional safe havens of Japanese yen and gold for shelter from the storm. Gold soared more than 6 per cent as equity markets melted down while the yen strengthened 5 per cent against the US dollar.

Responding to the movement of the Japanese yen, Japanese Finance Minister Taro Aso stated a readiness to intervene against an excessively strong yen. This could set the tone for the next policy setting meeting by the Bank of Japan (BOJ) scheduled for July 28 and 29.