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Gold gains as investors seek refuge after Brexit vote

Gold will continue to shine amid a weak dollar, says author and gold pro Jim Rickards.
Simon Dawson | Bloomberg | Getty Images

Gold rose on Monday, staying close to the more than two-year high hit on Friday as uncertainty over Britain's vote to leave the European Union pushed investors to sell equities and seek safer assets.

Bullion surged 4.8 percent on Friday, its biggest one-day gain since January 2009 as the British vote sparked sales of riskier assets. Gold is often perceived as a hedge against economic and financial risk.

"The short-term tactical gold buying of highly speculative flows has a history of being not sustainable, but there are also longer-term investors in this rally, who worry about contagion and ramifications in other markets and parts of the world," Sharps Pixley chief Ross Norman said.

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Spot gold rose as much as 1.5 percent to a session high of $1,335.30 an ounce and was up 0.77 percent at $1,325.65. It rallied 8 percent to $1,358.20 at one stage on Friday, the highest price since March 2014.

U.S. gold futures are at $1329.40, up $7.

Gold denominated in sterling rose to its highest since April 2013 on Friday, as the currency fell to its lowest against the dollar in 31 years.

"The uncertainty around the timing of negotiations to leave the EU means that not only do investors become more defensive and buy things like gold and the dollar, but it also keeps sterling under pressure and translates into a permanent loss of economic activity at domestic level," ETF Securities analyst Martin Arnold said.

The British referendum verdict probably means the Fed's ambitions for two rate rises this year have been placed on hold, analysts and experts said.

Goldman Sachs has raised its gold price forecasts saying Brexit suggested a more sustainable impact on the trajectory of U.S. interest rates.

Gold will help steady some shaky ground for investors in the short term as the markets and political environment move unexpectedly, said UBS in a Monday note to clients. The firm also raised three-month range estimates for gold prices.

Brexit sends oil, gold in opposite directions

Gold is sensitive to interest rates changes, with increases mostly signaling a rise in the opportunity cost of holding the non-interest yielding metal.

"Gold price will go higher in the third quarter as the full ramifications of Brexit begin to be felt but expect it to fall back in fourth quarter after the U.S. election and as the Fed gets ready to hike again," Macquarie said.

Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, jumped 2 percent to 934.31 tonnes on Friday, the highest since July 2013.

China's gold imports via the main conduit Hong Kong rose nearly 68 percent in May to the highest since December, data showed on Monday.

Spot silver rose 0.37 percent to $17.56 an ounce, after hitting its highest since January 2015 at $18.31 on Friday. Silver futures are unchanged at $17.79.

Platinum futures were down 0.57 percent at $981.50 an ounce and palladium futures were up 1.89 percent at $556.80.

-- CNBC's Celena Chong contributed to this report.