Interactive Investor

Gold price soars as investors flee to safe haven assets

24th June 2016 10:03

Kyle Caldwell from interactive investor

The gold price surged overnight, as traders ducked for cover ahead of the final result of the European Union referendum vote being announced.

As votes from up and down the United Kingdom came in it became clear that the 'leave' campaign had the edge, panicked investors promptly reduced equity exposure and moved into gold.

At one stage the gold price jumped 22% against the pound, to trade above £1,000 per ounce. The pound has plummeted. Overnight at one point it hit $1.3305, a fall of more than 10%. This represents a low not seen since 1985. At 9.30am the pound had fallen 7.3%, to trade at $1.37.

Gold offers security

In dollar terms the gold price, as at 9.30am, is currently trading at $1,312, which represents a two-year high. Last night at 10pm, when polling closed, the gold price stood at $1,257, so has gained 4.2% in value in less than 12 hours.

Gold is one of the few safe haven investments whose value tends to be uncorrelated with other assets. Over the past couple of months gold demand has spiked, due to growing concerns over global growth, as well as the uncertainty a Brexit vote would bring for Britain's economy.

Adrian Ash, head of research at BullionVault.com, commeted: "This is just the kind of crisis which gold helps savers and investors insure against.

"Gold offers certainty and security as stock markets and currencies sink, just as it did during the 2008 meltdown. The difference is that this shock was clearly signposted, and many private investors didn't wait for today's result to get prepared."

Other safe haven assets have been snapped up, including the Japanese yen. International investors view Japan's economy as more robust than other Asia nations, which is why in times of uncertainty the yen is a currency that trades park their money in.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser

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