LONDON — Gold soared as much as eight per cent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, sending investors scurrying for protection in bullion and other assets perceived as lower risk.

In sterling terms, gold delivered double-digit percentage gains to top 1,000 pounds an ounce for the first time in more than three years, rallying as much as 21 percent in early trade, while euro-priced gold rose as much as 13 per cent.

Spot gold peaked at US$1,358.20 per ounce and was up 5.5 per cent at US$1,323.85 an ounce at 1235 GMT, while U.S. gold futures for August delivery were up US$65.60 an ounce at US$1,328.70, off an early high of US$1,362.60 an ounce.

“(Brexit) benefits gold because in a general risk-off mode, it’s a natural safe haven for everybody,” Marie Owens Thomsen, chief economist at Indosuez Wealth Management, said.

“Now that the UK has voted to leave, we think there’s a higher probability that the US$1,350-1,360 per ounce level can be breached, and we’re therefore looking for an extended target in the US$1,400s.”

Gold priced in sterling was last at 965.80 pounds an ounce, up 14.5 per cent, having peaked at 1,019.03 pounds overnight. Euro-denominated gold was up 9.5 per cent at 1,195.20 euros an ounce, off a high of 1,244.34 euros.

Gold dealers in London reported surging demand for coins and bars among retail investors on Friday, with some saying stocks were tight.

Britain’s vote to leave the European Union forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War Two.

World stocks headed for one the biggest slumps on record as the vote triggered 8 percent falls for Europe’s biggest bourses and a record plunge for sterling.

The single currency was under pressure as investors worried that the Brexit vote could encourage similar movements in other European countries.

U.S. short-term interest rates futures hit contract highs in early U.S. trading, boosting expectations the Federal Reserve may cut interest rates to help shield the economy from any global fallout.

“This isn’t necessarily about Britain, it’s about uncertainty in the world’s largest economy,” Amanda van Dyke, fund manager at Peterhouse Asset Management, said.

“The general commentators are suggesting that the Fed is no longer going to raise rates because the dollar is soaring, and they can no longer afford for the dollar to keep going as fast as it is.”

“Realistically, the ability of the European market to speak with a common voice I think has been permanently severed, and that’s going to be a solid five per cent (price increase) in gold for at least the next couple of years.”

Silver was up 3.7 per cent at $17.91 an ounce, while platinum was 2.7 per cent higher at $985.05 an ounce. Palladium, the most industrial of the major precious metals, bucked the trend to fall 2.5 percent to $549.25 an ounce.

INDUSTRIAL METALS
Copper and other industrial metals slumped on Friday as concerns about economic growth rose after Britain voted to leave the European Union and the dollar soared.

The losses hit the base metals complex across the board with zinc and tin falling to three-week lows. But the moves were not as strong as in other commodities, partly due to the key role of China, the world’s biggest metals consumer.

“Of course, there are implications for EU growth, which would be negative for metals, and a strong dollar is another negative,” said Caroline Bain, senior commodities economist at Capital Economics in London.

“But I suppose since because China is primarily the main demand force for industrial metals, there’s the feeling it’s not going to have a massive impact on the (supply-demand) fundamentals,” Bain said.
Highlighting the impact that stimulus has had on the Chinese economy, a survey on Friday showed business confidence among entrepreneurs in China has picked up for the first time in more than two years in the second quarter of 2016.

Three-month copper on the London Metal Exchange slid as much as four per cent before trimming losses to trade 2.2 per cent lower at US$4,676 a tonne in official open outcry activity.

The UK vote to leave the EU forced the resignation of Prime Minister David Cameron as world stocks headed for one of the biggest slumps on record.

Copper at one point saw its biggest daily slide since July last year, after hitting its highest since May 6 on Thursday at US$4,795.

Traders said the relatively subdued reaction of base metals may also be due to the fact investors have already withdrawn a lot of capital from the downtrodden sector, where prices are stuck around the cost of production after years of oversupply.

“I don’t discount some impact in the very short term, but fundamentally, once it settles down I can’t see things being too different from where we were a week ago,” said analyst Daniel Hynes of ANZ in Sydney.

The drop in copper erased most of a weekly advance that had been sparked by a fall in the dollar as expectations grew that the U.S. would delay its next interest rate increase after its economy stumbled in the first quarter.

In the wake of the Brexit vote, the dollar index  surged 2.5 per cent to the highest level in more than three months, making commodities priced in the greenback more expensive for buyers using other currencies.

LME nickel was the biggest loser, trading down three per cent at US$8,950, but other metals failed to trade in official rings.

Aluminum was bid down 1.5 per cent at US$1,610, lead was bid down 1.9 per cent at US$1,698, while zinc  was bid two per cent lower at US$1,997.50 and tin was bid 1.5 per cent weaker at US$17,000, the latter two metals paring losses after touching their lowest levels since June 3.

© Thomson Reuters 2016