Gold Gains New Luster in Wake of UK's Brexit Vote

The UK's decision to leave the EU, and the response in the US, creates economic uncertainty that will help the gold price, financial analyst Koiti Murakami told Sputnik.

The UK's decision to Brexit from the EU caused disorder for Japan on Friday, when its Nikkei 225 benchmark index made its steepest drop since 2000, plunging by almost eight percent before closing at its lowest level in 20 months. The largest losers were major exporters like Toyota, Sony and Uniqlo.

The news of Brexit sent investors scrambling for to safe havens like gold and the yen, and the Japanese currency reached 99 to the dollar at one point on Friday, before closing at 102.2 to one dollar.

Koiti Murakami, a financial analyst with Daiichi Sohin, told Sputnik that the uncertain effects of Brexit will continue to be felt in the markets, and the value of gold in particular will continue to rise.

"On June 24 the price of gold on the New York Exchange reached $1,360 dollars per troy ounce. Then it immediately fell to $1,310; I think the price just evened out after the sharp rise," Murakami said.

"The risks which Brexit brings have a positive effect on the gold price. There is also an expectation that investment demand for ETF shares and other financial assets will increase. In September 2013 the price of gold on the New York Stock Exchange reached $1,400, and I think the price will now rise again to that level."

Murakami said that Brexit is likely to result in the US Federal Reserve deciding to put off the decision to raise interest rates, which will also affect the gold price.

"US financial institutions are very worried about the results of the UK referendum. The interest rate rise which was supposed to happen in June was depending on the result of the referendum in Great Britain. Since the referendum ended with that result, the US will of course find it difficult to raise interest rates."

"There is still a possibility that the interest rate will be raised in September, but if the economic situation gets even worse, then in the worst case scenario it will happen in December. I think the probability of a delay in the interest rate increase will be a factor that causes the gold price to rise further," Murakami said.