Gold hits 2-year high as Brexit tremors linger

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold pared gains after rising to the highest in more than two years on Wednesday, as U.S. equities reversed early losses, Treasury yields turned higher after hitting record lows and investors bought bullion as a haven from risk.

Equities and some bond yields were weak earlier as fears about the impact that Britain's vote to leave the European Union will have on economic growth gripped global markets and underpinned demand for safe-haven bonds.

Gold prices largely shrugged off the minutes from the U.S. Federal Reserve's June meeting that showed widespread unease over the so-called Brexit vote, which took place after the meeting.

 

"Generally the Fed is out of the spotlight while Brexit progresses," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.

Spot gold > was up 0.6 pct at $1,363.36 an ounce by 2:59 p.m. EDT (1859 GMT) after reaching a peak of $1,374.91, its highest since March 2014.

"The minutes are consistent with our forecast for a rate hike around the end of the year, with Brexit related uncertainties likely taking earlier meetings off the table," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.

U.S. gold futures for August delivery settled up $8.4, or 0.6 percent, at $1,367.10 per ounce.

"I think this run higher is going to continue for a while, as long as expectations for Fed (rate hikes) are not going up, and you have uncertainty over Brexit," ABN Amro analyst Georgette Boele said.

Gold priced in sterling > rose to its highest in over three years, touching a high of 1,069.36 pounds an ounce.

As well as investors shaken by stock market volatility fleeing to the safety of gold, the earlier drop in bond yields has cut the opportunity cost of holding bullion.

The world's largest gold-backed exchange-traded fund, SPDR Gold Shares , posted the biggest one-day surge in its holdings in more than six years on Tuesday. They jumped 28.8 tonnes to 982.72 tonnes, their highest since June 2013.

"We continue to expect U.S. real rates to fall from here and ultimately for equilibrium real rates to settle lower and have limited upside," UBS said in a research note. "These factors justify strategic gold allocations across different types of investors."

Silver > was up 0.7 percent at $20.05 an ounce, while platinum > was up 1.12 pct at $1,084 an ounce and palladium > was up 1.37 pct at $606.20 an ounce.

(Additional reporting by Vijaykumar Vedala and Nallur Sethuraman in Bengaluru; Editing by William Hardy and Andrew Hay)