Gold gains 1,220 to hit 26-mth high

Gold prices zoomed to a 26-month high closing in on the Rs 31,000 mark for 10 grams as Britain voted to exit the European Union (EU). The yellow metal gained Rs 1,220 for 10 grams, the biggest single-day gain in nearly three years, to Rs 30,905.
The biggest beneficiary (of Brexit) will be the safe havens dollar denominated assets (especially short-term US treasury) and gold, said Ritesh Jain, chief investment officer (CIO), Tata Asset Management.“Gold prices have jumped as uncertainty looms large, said Chirag Mehta,” senior fund manager, alternative investments, Quantum Asset Management Company.
Risk aversion is leading to investments in safe haven assets such as gold, said CP Krishnan, whole-time director, Geofin Comtrade. The rupee slipped to a four-month low of Rs 67.97 to the US dollar making the dollar-quoted gold expensive. There was a flight to safety with gold futures witnessing sharp gains.
Gold of 99.5% purity rose Rs. 1200 for 10 grams to Rs 30,700 in Mumbai, the highest since March 2014. Sovereign gold jumped Rs 1,122 to Rs 28,309 for eight grams. Silver, too, jumped rising by Rs 1,000 per kg to Rs 42,300 per kg in Mumbai as money moved to safe haven assets.
“Given the large uncertainties, an allocation to gold becomes extremely important,” Mehta said. “The best strategy is to hold on to gold and silver,” said Navneet Damani, associate vice president, commodity research, Motilal Oswal Commodities.
Gold prices in London, the international benchmark, surged about 8% to its highest level in more than two years. The jump in prices is the highest in percentage terms since the global financial crisis roiled equity markets and sent gold prices higher. Gold soared by about 11% in September 2008. Prices of the yellow metal peaked at around $1358 per ounce, the strongest since March 2014.
“There is no possibility of lowering of gold prices as demand is rising with supply contracting,” analysts tracking the sector said. India, China, Russia, several former states in the Soviet Union and Mexico are gobbling up gold at record pace this year, they said.
Gold demand reached 1,290 tonnes in Q1 of 2016, a 21% increase year-on-year, making it the second largest quarter on record, World Gold Council (WGC) said. “This increase was driven by huge inflows into exchange traded funds (ETFs) at 364 tonnes,” WGC said. Central banks remained strong buyers, purchasing 109 tonnes in the quarter.