Gold has biggest rally since Brexit as Trump leads White House race

By Manolo Serapio Jr and Sethuraman N R

MANILA/BENGALURU (Reuters) - Gold jumped nearly 5 percent on Wednesday to its strongest in six weeks as investors snapped up safe havens with Republican Donald Trump leading Democrat Hillary Clinton in the race for the White House.

It marked gold's biggest single-day gain since June 24 when it rose as much as 8 percent when Britain decided to leave the European Union. It closed up 4.8 percent that day.

A Trump win, which many see could lead to economic and global uncertainty, may also push the U.S. Federal Reserve to hold off from raising interest rates next month, further burnishing gold's draw, analysts say.

 

Trump scored a series of surprising wins in battleground states including Florida and Ohio on Tuesday, opening a path to the White House for the political outsider and rattling world markets counting on a win by Clinton.

The U.S. dollar sank and stocks plummeted as investors faced the possibility of a shock win by Trump. Sovereign bonds surged and the Mexican peso went into near freefall.

Spot gold rose as much as 4.9 percent to $1,337.40 an ounce, its strongest since Sept. 27, and was up 4.7 percent at $1,334.80 by 0511 GMT.

If Trump wins "there's more uncertainty in his platform and the direction that his policy may aim. Over the short term you may have investors flock to gold," said Mark Watkins, regional investment manager with The Private Client Group of U.S. Bank.

U.S. gold for December delivery was last up 4.9 percent at $1,336.40 an ounce.

U.S. rates futures imply traders see only a 36 percent chance of the Federal Reserve raising interest rates next month, based on Reuters data, which should support further gains in gold.

"The market turbulence that a Trump victory looks likely to bring will deter the Fed from hiking next month," said Craig Erlam, analyst at Oanda.

The Fed, which had shown a strong inclination to increase rates at its policy meeting next month before Tuesday's U.S. vote, may opt to wait for things to settle down first, said Vishnu Varathan, senior economist at Mizuho Bank.

"If the dust settles then the Fed may not find it necessary to renege on their inclination to hike rates sooner than later. But if market uncertainty doesn't abate then we are looking at very real prospects that the Fed would defer that rate hike into 2017," said Varathan.

Spot silver rose as far as $18.996 an ounce, its highest since Oct. 3, and was last up 3.2 percent at $18.93. Platinum rose nearly 2 percent and palladium was off 0.4 percent.

(Reporting by Manolo Serapio Jr.; Additional reporting by Apeksha Nair in Bengaluru; Editing by Richard Pullin)