Gold Price, Silver Win Brexit Medals as Economies Offered Life Support
London (July 1) climbed for a fifth week and silver surged to its highest since September 2014 as Britain’s vote to quit the European Union raised speculation central banks will keep world economies on life support.
Gold added 1 percent to $1,335.31 an ounce by 10:45 a.m. in London, according to Bloomberg generic pricing. Silver jumped as much as 3.6 percent and last traded up 2.7 percent at $19.2157. It’s up 8.3 percent this week, the most in almost three years.
In sterling, gold rose above 1,000 pounds an ounce. The metal has traded around this level, for the first time since 2013, since last week’s referendum.
Havens like gold and silver are in demand on prospects of weaker economies and lower yields on assets such as stocks and bonds, along with prospects central banks will act to support growth. Governor Mark Carney said Thursday that the Bank of England could cut interest rates within months as it tries to shield the U.K. economy.
Wound Back
Expectations for further U.S. rate increases have been wound back since the Brexit vote, while investors continue to pile into exchange-traded funds backed by gold, boosting the assets to the highest since 2013.
“Every hint at lower interest rates and at uncertainty is propelling gold and silver higher, whether that is rational or not,” Thorsten Proettel, a commodity analyst at Landesbank Baden-Wuerttemberg in Stuttgart, said by phone. “The governor of the Bank of England was the latest to play into this narrative.”
Assets in gold-backed ETFs have increased 34 percent to 1,952.5 metric tons this year as of Thursday, figures compiled by Bloomberg show. Gold will probably extend gains as the chances of a Fed hike have “decreased tremendously,” said Ivan Szpakowski, who left Citigroup Inc. earlier this year to set up hedge fund Academia Capital LLC.
Traders see just a 9 percent chance of higher U.S. rates by year-end following the Brexit vote, which came less than two weeks after policy makers at their June meeting held borrowing costs steady and pared forecasts for future Increases.
Source: Bloomberg
