Brexit drives up gold prices

July 07, 2016 | 08:57

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Britain’s exit from the European Union has led to an increase in the price of gold, which is likely going to continue in the foreseeable future.

Gold prices have been on a steady trend of increase and breaking records since the beginning of the week to reach $1,356.2 per ounce at the close on July 5, after rising 1.5 per cent since last Friday.

As of 2 PM on July 6, SJC gold was bought at VND37.85 million ($1,700) and sold at VND38.55 million ($1,730) per ounce, up VND1.1 million ($50) per ounce compared to July 4.

The rise came as news of Brexit shook the stock markets and people turned to the gold, which is considered a safer investment channel. Analysts predicted that the price of gold is going to continue rising this week. A recent survey at precious metal retail site Kitco.com showed that 65 per cent of people are very optimistic about the price of gold.

According to analysts from Vietnam’s Eximbank, after the initial shock of Brexit, the global financial market has stabilised. Investors’ focus is now back on important economic indicators announced at the beginning of the month, especially those from the US. In case the British pound and the Euro weaken, investors will scramble for gold.

Meanwhile, HSBC forecast the price of gold to go up by 10 per cent after Brexit, but predicted that prices may rise even higher if the market continues to be concerned about the future of the European Union.

Brexit may have a remarkable effect of appreciation on the Swiss franc and the Japanese yen, prompting the central banks of both countries to prepare measures to prevent prices spiralling out of control. If investors think that the two central banks will interfere, they will turn to gold, which will drive up prices even more.

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