The UK’s historic vote to end its EU membership was a call to action for risk averse investors, triggering a US$4.3 billion surge in holdings in gold-backed funds, the most in a single day in four years.
It adds up to a net inflow of US$32 billion into bullion-backed exchange traded funds this year, pushing the assets to the highest level since October 2013, according to data compiled by Bloomberg.
BlackRock Inc, Bank of America Corp and Eric Mindich’s Eton Park Capital Management are among the top holders in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion.
Photo: Reuters
Gold prices have rallied 25 percent this year as the US Federal Reserve holds off on increasing US borrowing costs and negative interest rates are embraced in Europe and Japan. The Brexit referendum adds to uncertainty in global markets with hedge funds boosting their bets on price gains to an all-time high just two days before the vote.
“It is going to be a very volatile ride,” Justin Smirk, senior economist at Westpac Banking Corp, said by e-mail. “There is much uncertainty about Brexit, not only just how will they do it, but even will they. We are going to see risk on, risk off and, as thus, rallies and fades in the gold market.”
Interest in gold exchange traded fund’s are likely to trend up, but it is unlikely to be a smooth, even process, he said.
Bullion for immediate delivery climbed 0.9 percent to US$1,327.65 at 1:43pm in Singapore, according to Bloomberg generic pricing. The metal surged to US$1,358.54 on Friday to a level not seen since March 2014 and the 8.1 percent gain was the biggest intraday jump since 2008.
Prices could be as high as US$1,424 an ounce by the end of the year, according to the median of 12 forecasts in a Bloomberg survey of analysts and traders from New York to London conducted on Friday.
Money managers also boosted their net-long position in gold futures and options by 6.7 percent to 256,898 contracts in the week ended June 21, according to US Commodity Futures Trading Commission data released three days later.
That is the highest since the data begins in 2006. The previous record was 253,653 reached in August 2011 — just a month before gold touched US$1,921.17 an ounce, the highest ever.
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