Gold price hits two-year high

Investors are flocking to the safety of gold in the wake of the UK's Brexit vote and uncertainty about the US Federal Reserve's ability to normalise interest rates, says VanEck Australia.

The price of gold reached US$1,368 per ounce yesterday, suggesting that a new bull market for the precious metal could be underway, said VanEck Australia’s managing director, Arian Neiron.

Mr Neiron said the risk aversion of Australian investors can be gauged by the $54 million outflow from exchange-traded products in June.

“Investors are feeling the fall-out of Brexit this month and this is reflected in June’s monthly ETP flows. Investors generally moved away from investing in broad-based Australian equities and are instead shifting into safe haven assets like gold,” he said.

Gold bullion and gold miners ETFs have attracted $33 million in the year to date – and $19 million in June 2016 – Mr Neiron said.

“Gold thrives on financial risks and investors are generally feeling uncertain about the world economy,” he said.

“It isn’t just Brexit, but investors are generally feeling cautious because the Fed is unable to normalise interest rates, there is an anticipated RBA rate cut on the horizon, most likely in August, and there are many geo-political risks in the northern hemisphere.

“All these factors are further supporting investment into gold as a currency hedge and as a way to protect their wealth,” Mr Neiron said.