Gold soars, oil slumps
after shock British vote to exit EU
Send a link to a friend
[June 24, 2016]
By Manolo Serapio Jr and Aaron Sheldrick
MANILA/TOKYO (Reuters) - Gold rallied the
most since the 2008 global financial crisis and oil and copper tumbled
on Friday, as Britain's vote to leave the European Union rattled
commodities markets, forcing a selloff in risky assets and a rush to
Sharp falls in oil, base metals and grains mimicked other financial
markets, which dived as complete results from a British referendum
showed a near 52-48 percent split for the UK leaving the EU.
The vote created the biggest global financial shock since the 2008
crisis, this time with interest rates around the world already at or
near zero, stripping policymakers of the means to fight it.
Sterling suffered its biggest one-day fall in history, plunging more
than 10 percent against the dollar to levels last seen in 1985 on fears
the decision will hit investment in the world's fifth-largest economy.
"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," said Vishnu Varathan, senior economist at Mizuho
"Already we are in a situation where global demand is not forthcoming.
If we take a few more steps back the effects would certainly be hardest
felt in the UK followed by the EU" and the impact could spread to the
rest of the world, said Varathan.
Spot gold was up 5.1 percent at $1,319 an ounce by 0651 GMT, after
rising as much as 8.2 percent to $1,358.20, the strongest since March
2014. Gold had surged nearly 11 percent in September 2008.
Britain would be the first state to leave the 28-nation European Union
since its foundation.
With the global economy likely to take a hit, it could curb demand for
raw materials from oil to copper, dragging down prices again just as
many were regaining favor in recent weeks.
"Bad economies in the UK and Europe are not good for oil and there could
be a domino effect on other economies in Asia," said IHS oil analyst
[to top of second column]
A workers counts ballots after polling stations closed in the
Referendum on the European Union in Islington, London, Britain, June
23, 2016. REUTERS/Neil Hall -
Gold in terms of sterling and euro surged to the highest since April 2013.
U.S. crude was down $2.50, or 5 percent at $47.61 a barrel and Brent oil slid
$2.53, also 5 percent, to $48.38 a barrel.
London copper fell 3 percent to $4,637.50 a tonne, after touching a
seven-week high of $4,795 on Thursday. Nickel fell 3.9 percent and zinc dropped
Losses were limited in China-traded commodities, with rebar futures down 1
percent and iron ore off 0.8 percent.
There could be further selling in LME base metals as London traders came in,
said Daniel Hynes, commodity strategist at ANZ.
"I don't discount some impact in the very short term, but fundamentally, once it
settles down I can't see things being too different from where we were a week
ago," he said.
(Additional reporting by Melanie Burton in MELBOURNE and Florence Tan in
SINGAPORE; Editing by Joseph Radford and Ed Davies)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.