Gold gains as investors seek refuge after Brexit vote

[NEW YORK] Gold rose on Monday, staying close to the more than two-year high hit on Friday, as uncertainty over Britain's vote to leave the European Union pushed investors to sell equities and seek safer assets.

Bullion finished Friday up 4.8 per cent, its biggest one-day gain since January 2009 as the British vote sparked sales of riskier assets. Gold is often perceived as a hedge against economic and financial risk.

"The short-term tactical gold buying of highly speculative flows has a history of being not sustainable, but there are also longer-term investors in this rally, who worry about contagion and ramifications in other markets and parts of the world," Sharps Pixley chief Ross Norman said.

Spot gold rose as much as 1.5 per cent to a session high of US$1,335.30 an ounce and was up 0.8 per cent at US$1,326.26 by 3:16 pm EDT (1916 GMT). It rallied 8 per cent to US$1,358.20 at one stage on Friday, the highest price since March 2014.

US gold futures settled up US$2.30, or 0.2 per cent, at US$1,324.70 per ounce.

Britain's shock vote to leave the European Union roiled global markets for a second day, hammering US and European banks, lifting bond prices and dragging the British pound to a 31-year low.

"The uncertainty around the timing of negotiations to leave the EU means that not only do investors become more defensive and buy things like gold and the dollar, but it also keeps sterling under pressure and translates into a permanent loss of economic activity at domestic level," ETF Securities analyst Martin Arnold said.

The British referendum verdict probably means the Fed's ambitions for two rate rises this year have been placed on hold, analysts and experts said.

Goldman Sachs has raised its gold price forecasts saying Brexit suggested a more sustainable impact on the trajectory of US interest rates.

UBS Wealth Management Research raised its three-month price forecast for gold to US$1,275-US$1,425 per ounce and 12-month to US$1,275, on uncertainties following the UK vote and its expectation for just one Fed rate hike this year.

"Central bank readiness to provide additional monetary support if needed should support gold's short-term appeal," UBS said.

Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, jumped 2 per cent on Friday to the highest since July 2013.

Spot silver rose 0.1 per cent at US$17.67 per ounce. Platinum was down 0.2 per cent at US$979 an ounce and palladium was up 1.7 per cent at US$556.10.

REUTERS