Gold rose for a second day, adding to the biggest surge in seven years on Friday, as the fallout from the U.K.’s decision to leave the European Union boosted haven demand.
Bullion increased as the pound extended a record selloff and European equities fell to the lowest since February. Gold jumped 4.7 percent on Friday as the referendum result caused turmoil across global markets, spurring a $4.3 billion surge in holdings in bullion-backed funds, the most in four years.
Gold has rallied 25 percent this year, the most in at least three decades, as investors sought to protect their wealth and the U.S. Federal Reserve indicated it would keep interest rates low. Prices may reach $1,424 an ounce by year-end, more than 7 percent higher than now, according a Bloomberg survey of analysts and traders from New York to London conducted Friday. Goldman Sachs Group Inc. raised its outlook for gold over the next year by $100 an ounce.
“I’m bullish gold because now with Britain leaving there could be danger of the whole euro zone having more political issues,” Miguel Perez-Santalla, a sales and marketing manager at Heraeus Metals New York LLC, said in a telephone interview. “People are going to want to stay hedged with gold; they didn’t think the Brexit was possible, and then it happened.”
Gold futures for August delivery rose 0.2 percent to settle at $1,324.70 an ounce at 1:44 p.m. on the Comex in New York, the biggest two-day gain since August 2011.
Investors are concerned even after Chancellor of the Exchequer George Osborne soughtto calm markets. Prime Minister David Cameron announced his resignation on Friday, the opposition Labour Party has been thrown into chaos and Scotland is agitating for independence.
The “growing instability” will push gold higher, Mikhail Stiskin, chief financial officer at Polyus PJSC, Russia’s largest gold miner, said in an interview. The uncertainty and flight-to-safety sentiment are likely to be more persistent than the initial reaction to the referendum, Goldman Sachs said. It raised its three-month price target to $1,300 an ounce from $1,200 and sees prices at $1,250 in a year, up from $1,150.
Holdings in exchange-traded funds backed by gold rose 17.5 metric tons to 1,922.1 tons as of Friday, the highest since October 2013, data compiled by Bloomberg show. The $4.3 billion surge in assets was the most in a single day since 2012.