Gold Prices Surge after Brexit


Oil and copper may have tumbled, but gold rallied, as Britain’s vote to leave the European Union upset commodities markets, causing a forced selloff in risky assets and a rush towards safe havens.

The sharp falls in base metals, grains, and oil mimicked other financial markets that tanked as the full results from a British referendum showed a 52% to 48% split for the UK to leave the EU.

Financial shock

Gold and Brexit

The vote led to the largest global financial shock since the 2008 global financial crisis. Sterling experienced its greatest one-day fall in history, tanking by over 10% against the dollar, reaching levels that we’ve not seen since 1985 because of the fear the decision is going to affect investments in the  fifth-largest economy in the world.

Vishnu Varathan, a senior economist at Mizuho Bank, commented, “it’s certainly going to retard the kind of recovery momentum we’ve seen shaping up in Europe, and for the UK it will probably negate a lot of the stimulus effects.”

Spot gold was up 5.1%, closing at $1,319 an ounce by 06:51 GMT, after having seen an increase of 8.2% to $1,358.20, which is the strongest that’s been seen since March 2014. In September 2008, gold had surged nearly 11%.

Since its foundation, Britain will be the first state to depart from the 28-nation European Union.

What happens to the global economy?

Brexit influenced global economy

It’s likely that the global economy is going to take a hit. We could see the demand for raw materials from copper to oil curbed drastically, resulting in the prices being dragged down again, just as some had begun to gain favor in recent weeks.

Gold, in terms of sterling and euro, surged to the prices we haven’t seen since April 2013.

U.S. crude oil was down $2.50, or 5% at $47.61 a barrel, and Brent oil slid $2.53, also 5%, to $48.38 a barrel.

London copper fell 3% to $4,637.50 a ton, after maintaining a 7-week high of $4,795. Nickel fell 3.9% and zinc dropped 3%.

How do you think Brexit is going to affect the economy further? Share your theories in the comments below and learn how to successfully invest in oil and gas futures and the basics of currency pairs.

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