Oil down, gold up while STI bleeds amid Brexit uncertainties

The price of gold has shot up, even as stock markets are on a roller coaster ride.
The price of gold has shot up, even as stock markets are on a roller coaster ride.PHOTO: BLOOMBERG

SINGAPORE - Amid the Brexit chaos that has so far plunged the regional stock markets into extreme volatility, other risk assets sensitive to the outcome of the referendum are taking a beating.

The British pound is bearing the brunt, crashing down close to 9.3 per cent to US$1.35 as of 11a.m., while crude oil futures Brent has pared around 3.7 per cent to US$49 a barrel.

All this unfolded as the vote count shows no clear indication of whether the Leave or Remain camp is winning the historic referendum. The leave camp now has 51.3 of the votes counted so far, but the lead was with the Remain camp just 30 minutes earlier. Some 200 results are yet to be announced.

This has put the stock markets on a roller coaster ride, and the Straits Times Index is back in the red, paring 2.25 per cent to 2,730.8. Earlier it managed to score a small gain, recovering from the 1 per cent drop at the start.

"The votes are currently tilting toward Leave, so we're in a risk-off phase. In this situation you can expect the pound to go down, the US dollar to go up, the Japanese yen to strengthen, and gold rising more," Bank of Singapore investment strategist James Cheo told The Straits Times.

The price of gold - considered as a safe haven asset - has shot up 3.1 per cent to US$1,299. Last week gold prices touched US$1,300 as Brexit fears intensified.

"Gold is doing well not just because of Brexit. There are still many risk events beyond the referendum, and I think gold will continue to do well even after the Brexit results are settled," Mr Cheo added.


Oil prices, on the other hand, are suffering as part of investors' plan to sell off growth-sensitive assets.

"The fundamentals of oil supply have not changed, but when the Brexit risks pick up oil will go down, because it's a risk-on play. Economically, Brexit may also lead to the British economy shrinking and affect the rest of Europe.