Gold races to 28-month high, oil slides on renewed Brexit fears

Gold rallied to a more than two-year high and oil extended its losses on Wednesday, as renewed fears over the impact of Britain's exit from the European Union prompted investors to dump riskier assets in favor of the safer bullion.

Financial markets were weak across the board, with Asian stocks tumbling and sterling plumbing a 31-year low, on worries that global efforts to boost liquidity may not be enough to cushion the impact of Brexit. Concerns that financial and political instability in Italy could lead to even more chaos in Europe spooked investors further.

"The market is beginning to focus on the wider euro zone risk," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Underlining strong appetite for gold, seen as a safe-haven during economic uncertainties, open interest in Comex futures and holdings in the top gold-backed exchange-traded fund rose to multi-year highs.

Spot gold XAU= surged to $1,371.40 an ounce, the most since March 2014, and was up 1 percent at $1,369 by 0456 GMT. Comex gold futures GCcv1 rose 0.9 percent to $1,371.10 as open interest topped 640,000 lots, the highest since 2010.

"The general bullish sentiment for gold coupled with the post-Brexit uncertainty continues to underpin the metal and the complex as a whole," wrote MKS Group trader James Gardiner.

Holdings by SPDR Gold Trust (GLD) rose to 31.6 million ounces, the most in three years. HLDSPDRGT=XAU

The flight to gold picked up speed on reports three British commercial property funds worth about 10 billion pounds had suspended trading within 24 hours.

In oil markets, prices extended losses as Brexit worries together with indications that output by the Organization of the Petroleum Exporting Countries (OPEC) hit a record high in June dragged on sentiment.

Brent crude LCOc1 slipped 0.4 percent to $47.79 a barrel after losing 4.3 percent on Tuesday. West Texas Intermediate dropped CLc1 0.5 percent to $46.39, having slid 5 percent overnight.

"You have the dollar strengthening, risk aversion rising because of the ongoing Brexit saga and then there are the actual supply and demand aspects to consider on top of all this," Fawad Razaqzada, market analyst for forex, said in a note.

Among other commodities, Japan's rubber futures JRUc6 fell as much as 6 percent, while losses in base metals were limited with London copper CMCU3 steady below Monday's two-month high of $4,960 a ton.

"The worst case scenario for markets would be the forcing of another euro zone emergency where the referendum is lost leaving Italy without effective government and a looming banking crisis that can't be solved without compromise between the different national interest groups within Europe," said CMC's Spooner.
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