Gold shines in the shadow of Brexit bloodbath

Published June 29th, 2016 - 08:00 GMT
A combination of economic and political uncertainty had created a 'perfect storm' in favour of the yellow metal. (Shutterstock)
A combination of economic and political uncertainty had created a 'perfect storm' in favour of the yellow metal. (Shutterstock)

Global markets wiped out another $69.2 billion from the combined net worth of the world's 400 richest people on Monday amid the Brexit turmoil as gold, the safe-haven metal, continued to gain luster by soaring to above £1,000 per ounce in London, the highest since April 2013.

As global markets went on a tailspin resulting in a market cap loss of $3 trillion, the world's richest people lost a total of $196.2 billion in the last two trading days since the UK unnerved investors with a vote to leave the European Union.

However, on Tuesday global markets showed signs of stabilising on Tuesday with the Dow Jones Industrial Average gaining 179 points, or 1.1 per cent, to 17,319 shortly after the opening bell.

The S&P 500 added 1.1 per cent, and the Nasdaq Composite rose 1.4 per cent.

In New York, gold for August delivery settled up 0.2 per cent at $1,324.70 a troy ounce, paring some gains after trading as high as $1,336.60 earlier in the session. Gold's gains were capped by the stronger dollar, which made the dollar-pegged currencies, including dirham stronger while making dollar-denominated commodity more expensive to buy for holders of other currencies.

The 400 billionaires on the index control $3.8 trillion, a 1.8 per cent decline from the start of the year, according to the Bloomberg Billionaires Index.

The pain on Monday was felt most by Europe's wealthiest, where 92 billionaires lost $29.4 billion, bringing their two-day decline to $81.7 billion.

Since year-end, their net worth has slid more than $45.5 billion, a 5.1 percent decline.

The 150 billionaires from the US and Canada lost $26.7 billion, or a two-day total of $62.5 billion. They're essentially flat for the year, with a collective gain of $236 million. China's 26 billionaires lost $1 billion on Monday, bringing their two-day total loss to $5 billion. They're down 7.4 per cent this year, an $18.7 billion drop.

Avneet Mattu, Gold Analyst at Sharps Pixley, said a combination of economic and political uncertainty had created a perfect storm in favour of the yellow metal, with prices spiking to £1,018 per ounce late on Tuesday afternoon in London trade.

The UK's decision to leave the EU has prompted investors to seek gold as a safe haven in these unsure times. "After an initial price correction post-vote, we are now experiencing solid two-way trade with a significant number of people buying as well as selling gold," he said.

According to Evolution Mining's Jake Klein, gold may stand at the start of a major bull market should the UK's Brexit vote prove to be a forerunner of greater political and financial instability around the world. "With the rise in uncertainty, investors are coming back to the market. It is an alternate currency, it's performed that role as a haven for over 2,000 years," he was quoted as saying.

Germany's third-richest person, Georg Schaeffler, fared the worst on the index on Monday with $1.9 billion trimmed from his net worth. Europe's richest person, Spanish retailer Amancio Ortega, shed $1.5 billion. Bill Gates and Mark Zuckerberg were the worst-performing US billionaires on Monday losing $1.8 billion and $1.6 billion, respectively. There were 69 billionaires on the index who added to their fortunes Monday.

Takemitsu Takizaki, the founder of Osaka-based Keyence, a maker of electronic sensors, led the gainers with an increase of $579.3 million. Japanese retailer Tadashi Yanai, chairman of Tokyo-based Fast Retailing Co., was behind him with a $552 million rise. Nineteen billionaires on the index added more than $100 million Monday.

By Isaac John

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