Gold traded near its highest level in four weeks on Monday as uncertainty mounts over the potential risks if Britain decides to leave the European Union and as traders price in zero chance of the Federal Reserve raising interest rates at a meeting this week.
Bullion for immediate delivery traded at $1,274.60 an ounce in Singapore after rising to $1,278.50, the highest since May 18, according to Bloomberg generic pricing.
Gold’s rally has regained its footing as the possibility of further turbulence in markets boosts demand for haven assets. The metal is up 20% in 2016 as expectations have diminished for the Fed to raise borrowing costs at its meeting ending June 15, benefiting gold, which doesn’t pay interest. A Brexit vote on June 23 could propel prices to $1,400, Capital Economics Ltd. analysts said Friday. Polls published over the weekend showed the vote was too close to call.
“We’ve got some concerns now about the approaching vote on Britain leaving the EU which is putting a ripple of that concern in investors’ minds, so all those things are pointing towards a nice little rally towards $1,300,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. Reduced prospects for a rate hike are also “creating the environment for the price to rise,” he said.
As of Friday, federal funds futures implied an 18% chance the US central bank will tighten policy in July, down from 55% on June 2, while December is the first month with at least even odds of a rate increase.
Holdings in gold-backed exchange-traded funds added 6.5 metric tons to 1,873.8 tons as of Friday, the highest level since November 2013, data compiled by Bloomberg show. The assets rose for a ninth straight day.
In China, bullion of 99.99% purity climbed as much as 2.4% to 271.50 yuan a gram ($1,282 an ounce) on the Shanghai Gold Exchange, the highest level since May 4.
Silver holdings in ETFs have increased for 10 straight days and are just short of the record 20,182 metric tons set in October 2014.
Spot silver fell 0.9%, trimming this year’s gain to 24%.
Palladium lost 0.6% and platinum retreated 0.3%.
