Gold Gives Bugs Best Half in 40 Years as Brexit Highlights Risks
London (Jun 30) The world’s a scarier place for investors these days and many are turning to gold, with the metal rallying in the first half more than in any year since 1974.
Market turmoil after a U.K. vote to leave the European Union simply adds to concerns over growth around the world, including China, that have pushed gold prices up 24 percent this year. Investors piled into exchange-traded funds backed by the metal and volume on the largest futures exchange hit a record.
Prospects of a further U.S. interest-rate increase have been wound back since the populist Brexit vote, which has only added to a sense of uncertainty over U.S. elections this year.
“The macro environment remains eminently favorable for bullion,” said Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London. “The question is whether those ETF flows and Comex volumes will prove sufficiently sticky to support prices in the second half.”
Gold for immediate delivery was set for a second straight quarterly gain, rising 6.8 percent in the three months to $1,316.74 an ounce by 11:51 a.m. in London, according to Bloomberg generic pricing. It jumped to the highest in more than two years on June 24 after the Brexit vote.
Surging prices after the U.K. result deals a blow to demand in India, the second-largest consumer, and may cut imports to the lowest in seven years, according to Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation.
Global investor demand remains strong.
Holdings in gold-backed ETFs rose 7.6 tons to 1,947.9 tons on Wednesday, the highest level since September 2013. They have jumped 33 percent this year, the biggest first-half increase since 2009. Investors traded 28.7 million futures contracts on the Comex, the busiest first quarter on record, data compiled by Bloomberg show.
In other metals:
•Spot silver climbed 0.5 percent to $18.395 an ounce, up 19 percent this quarter.
•Palladium is headed for a 4.3 percent gain since March.
•Platinum retreated 0.4 percent to $1,004.89 an ounce. It’s up 3 percent over the past three months.