Gold was firmly on the front foot this week as meetings of the US Federal Reserve and Bank of Japan raised more questions over the health of the global economy.
The Fed was cautious while the BoJ sat on its hands, which was enough to pull the rug from under the dollar and give gold a nice tailwind.
Gold has risen by about 20% this year so far and does not look like it needs to much support at present, but according to HSBC it may get it from an unlikely source in a couple of months – Brexit.
So far gold has been of one of the few areas untouched by the will/won’t Britain leave the EU debate, but if the UK does vote to leave the metal may surge if the pound tanks as widely predicted.
In the event Brexit does become a reality the bank has been recommending the Swiss franc as a hedging strategy, but gold may do equally as well it adds.
Gold and the Swiss franc (CHF) are often bracketed together as safe havens and the bank sees little risk if the UK does vote to stay as ther is minimal political risk in the price of either asset at present.
“If 'Brexit' is rejected then the CHF is unlikely to weaken much as little political risk seems to be priced into the currency.
“If, by contrast, the UK votes to leave the EU, then the CHF would enjoy a sizeable safe-haven bid amid the scramble out of GBP and EUR," said the bank.
Gold should benefit alongside the Swiss currency but with also little downside seemingly if the vote goes the other way, the metal too is a good hedge on the vote suggests HSBC.
So far the polls suggest the stay in camp has a big lead but it’s still early days and many of the pollsters say a large of number of those they speak have indicated they may change their minds.
HSBC notes there was similar uncertainty in the run-up to the last general election in 2015.
Then, worries over a Tory defeat sent both gold and the Swiss franc higher and as the Brexit polling day of 23 June gets nearer this may be the case again, the bank suggests.
Gold was surging higher on Friday anyway and at a high for the year of US$1,285 a couple of hours into trading on Wall Street.
If it holds that level it would be the highest it has been for over a year having added almost US$50 or 4% over the past seven days.