Gold Slides From Near Two-Year High as Brexit Bets Retreat

Updated on
  • All campaigning in the Brexit referendum was suspended
  • Silver ETF holdings climb to record, gold assets increase

Gold Rallies on Brexit Fears

Gold fell from the highest in almost two years as traders pared bets on the outcome of next week’s U.K. vote on membership in the European Union, reducing demand for the metal as a haven.

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The pound erased losses against the dollar after the killing of a U.K. lawmaker Thursday fueled speculation the nation’s voters will be more likely to favor remaining in the European Union in next week’s referendum. Gold has advanced this month as those pushing to leave the EU held a steady lead in opinion polls.

“The takeaway is that if there’s no Brexit, then it would mean the need for haven buying of gold will lessen,” George Gero, a managing director at RBC Wealth Management in New York, said in telephone interview.

Gold for immediate delivery fell 0.4 percent to $1,286.20 an ounce at 2:42 p.m. in New York, according to Bloomberg generic pricing. The metal rose as much as 1.9 percent earlier, touching the highest since August 2014.

The death of the U.K. Labor Party lawmaker led to a suspension of campaigning before the June 23 Brexit referendum.

Before the halt was announced, spot bullion was headed for a seventh straight increase. The Federal Reserve reined in its projection for rate increases over the next two years. Fed Chair Janet Yellen said Wednesday that the U.K.’s June 23 referendum on whether to leave the EU was a factor in holding rates steady.

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Gold futures for August delivery rose 0.8 percent to settle at $1,298.40 an ounce at 1:38 p.m. on the Comex in New York. The metal pared gains in electronic trading after the close.

The number of Fed officials who see just a single rate hike this year rose to six, from one in March. The odds of a rate increase by December have dropped to 35 percent from 76 percent at the start of this month, Fed funds futures show. Low borrowing costs boost the appeal of owning precious metals, which don’t pay interest.

Gold will rally if Britons choose to exit the EU, reaching $1,350 within a week of the vote, according to a Bloomberg survey of traders and analysts. Should a majority choose to remain in the bloc, bullion might slide to $1,250, it showed.

In other metals news:

  • Copper for delivery in three months dropped 2.3 percent to $4,535 a metric ton ($2.06 a pound) on the London Metal Exchange. Aluminum, zinc and nickel also declined in London, while lead and tin gained.
  • On the Comex, silver futures for July delivery climbed 0.6 percent to settle at $17.607 an ounce, while copper futures fell 2.1 percent to $2.048 a pound.