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Gold hits a three year high above GBP 1,000 per oz for UK investors

Post-Brexit uncertainty has caused gold to soar to above GBP 1,000 per oz, the highest since 01 April 2013. A combination of economic and political uncertainty have created a perfect storm in favour of the yellow metal, with prices spiking to GBP 1018 per oz late this afternoon in London trade.

The U.K.’s decision to leave the EU has prompted investors to seek gold as a safe haven in these unsure times. After an initial price correction post-vote, we are now experiencing solid two-way trade with a significant number of people buying as well as selling gold. Gold has been the best performing asset this year, having jumped up 24 pct in US dollar terms (from USD 1,072.72 per oz to USD 1326.26 per oz) but has rallied by a formidable 39 pct from (GBP 719.70 per oz to GBP 998.63 per oz) for UK investors. The two-way trade reflects the collision of fresh buying on heightened geopolitical concerns, meeting profit-taking by earlier buyers given the extraordinary gains the UK investor has seen in just 6 months.

The difference in outlook also reflects two sorts of buyers currently in the market ; on the one hand we are seeing good physical buyers who typically take a long term strategic position in gold, and on the other, there is evidently still a very large speculative component in the price as evidenced by futures traders taking all-time-long positions.

Whether this market has legs to run higher may in the end be decided by whether concerns emanating from BREXIT sees contagion across Europe, or whether the temptation to take profit becomes over-whelming. Either way, a period of consolidation would be welcomed.

Avneet Mattu

Gold Analyst
Sharps Pixley Ltd

27 Jun 2016 | Categories: Gold

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