Gold soars, oil slumps after shock British vote to exit EU

[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 safe havens.

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 Bank.

"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 Victor Shum.

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 3 percent.

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 reserved.]

Copyright 2016 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.