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Gold hits 2-yr high, oil slumps on fresh Brexit fears

business Updated: Jul 06, 2016 19:17 IST

Gold rose to $1,375.45 per ounce in mid-session trading, its highest level since March 17, 2014.(AFP Photo)

The price of gold, on Wednesday, reached peaks last seen more than two years ago as investors fled to the safety of the precious metal as fresh fears about the impact of Britain’s exit from the EU sent investors fleeing high-risk assets.

Gold rose to $1,375.45 per ounce in mid-session trading, its highest level since March 17, 2014. “Gold is once again to the fore,” said David Govett, head of precious metals at Marex Spectron.

The shock result of the June 23 referendum, followed by political infighting in Britain, has pushed the pound to record lows and depressed stock markets.

Silver also boasted a two-year high Wednesday, reaching $21.14 per ounce, a level last seen on July 18, 2014.

In New Delhi, the yellow metal surged Rs 400 to regain the Rs 31,000 and end at Rs 31,050 per ten gram. Silver rose by Rs 750 to end at Rs 47,400 per kg.

Fresh money flowing into the gold market came mostly from equity markets, which were falling again on Wednesday, but also from bond markets, themselves refuge investments, where yields have been testing record lows, Comerzbank analysts noted

Indian equity and forex markets were shielded from immediate impact as they were closed on Wednesday on account of Id-ul-Fitr.

However, major Asian markets closed in red with Japan’s Nikkei 225 and Hong Kong’s Hang Seng closing down by over 1% each.

“As our glorious leaders (in the UK) continue to muck around and bicker with each other, sterling is sliding ever lower. This is impacting on the euro and various other markets and generally contributing to an atmosphere of worry and uncertainty,” Govett added.

A breach of the key $1,400 level will become a distinct possibility, Govett said, “if the UK continues to talk itself down and drags others into the quagmire”.

Oil losses mount

Brexit fears also pulled down oil prices tracking losses across equities and currency markets.

A warning from the Bank of England that there was evidence risks from the June 23 Brexit vote “have begun to crystallise” sent shudders through world markets, with the pound diving to levels not seen since mid-1985 and stock markets diving.

This week, Brent dived 4.3% and West Texas Intermediate shed 4.9% on Tuesday. “The risk aversion that gripped equity indices was mirrored in the oil markets and heavy losses were registered across the board,” said PVM analyst Stephen Brennock.

“Uncertainties and concerns over how Brexit will influence the market is expected to last for a long time, increasing volatility in oil prices,” Will Yun, commodities analyst at Hyundai Futures in Seoul, told Bloomberg News..