Gold Rises on Post-Brexit Bets Central Banks Will Step Up Easing

Gold Holds Near Two-Year Highs in Post-Brexit Market
  • Holdings in exchange-traded gold jump to highest since 2013
  • Traders see chance of Fed cutting interest rates this year

Gold advanced as investors speculate central banks will have to continue supporting the global economy in the wake of Britain’s vote to quit the European Union.

Gold’s investment case has been strengthened by the Brexit vote last week as the fallout may spur the world’s central banks to step up easing, hurting currencies and favoring bullion, Marc Faber, publisher of the Gloom, Boom & Doom Report, said Wednesday. Bank of Japan chief Haruhiko Kuroda said that more funds can be injected into the market if needed.

Gold is trading near its highest level in two years and is heading for its best first-half in more than 35 years while investors abandon risk assets and turn to havens. Federal Reserve Governor Jerome Powell said Tuesday that global risks have shifted further to the downside after the referendum, introducing new uncertainties that may merit reassessing monetary policy.

“The whole British referendum could take two years or more, and all central banks are going to be accommodative until things normalize,” Eli Tesfaye, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “I just don’t think right now the Fed is going to get aggressive raising rates because that’s going to just add more chaos.”

Gold futures for August delivery gained 0.7 percent to settle at $1,326.90 an ounce at 1:52 p.m. on the Comex in New York, gaining for the third time in four sessions and on pace for a second quarter of gains.

Traders are pricing in only 11 percent odds that the Federal Reserve raise rates by December, down from 50 percent before the Brexit vote, Fed funds futures show. A gauge of the dollar declined Wednesday.

Holdings in exchange-traded funds backed by gold rose 5.62 metric tons to 1,940.3 tons as of Tuesday, the highest level since September 2013, data compiled by Bloomberg show. Investors have added 35.7 tons to ETFs in the past three days.

In other metals:

  • Silver futures for September delivery surged 2.9 percent to $18.407 an ounce, the highest close since January 2015.
  • On the New York Mercantile Exchange, platinum and palladium gained.
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