London: Gold rose on Monday as political turmoil following Britain's vote to leave the European Union supported prices after a burst of short-covering activity in China had pushed them back towards last week's two-year high.
The precious metal reached a peak of $1,357.60 an ounce overnight, less than $1 below last month's high, before easing back below $1,350 an ounce.
Silver also benefited from a surge of buying in China which at one point took it up more than 7 per cent, breaking above $21 an ounce for the first time in two years. The metal has also benefited from strong technical signals.
Spot gold was up 0.7 per cent at $1,351.35 an ounce at 1130 GMT (5 p.m. in India), while US gold futures for August delivery were up $15.40 an ounce at $1,354.40. Silver was up 2.7 per cent at $20.29 an ounce.
"Silver always moves faster than any other," ABN Amro analyst Georgette Boele said. "It's more to do with liquidity. There is momentum in the market, gold is already up a lot, and silver is still relatively cheap. It is also benefiting from haven demand."
"You have a combination on the one hand of safe-haven demand because of the Brexit vote, and at the same time the pricing out of the Fed rate hike expectations, which is positive for precious metals."
A post-Brexit recovery across European markets stalled on Monday with major share indices mixed.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, rose 3.9 tonnes to 953.91 tonnes on Friday, the highest since July 2013. In the first half its holdings increased by 308 tonnes, its biggest half-yearly increase in seven years.
The US markets are closed on Monday for the Independence Day holiday.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, fell to a two-year low on Monday, as silver extended gains against gold.
"There is a little bit of a two-way battle going on in silver with a number of players going short in China," said an analyst with an international investment bank.
The Shanghai Exchange Futures went limit up as onshore players have aggressively been covering their short positions in the last few days, especially on Monday, the analyst said.
Hedge funds and money managers raised their bullish positions in COMEX gold and silver contracts to record highs in the week to June 28.
Platinum was up 0.3 per cent at $1,062.05 an ounce, while palladium was up 0.2 per cent at $605.47 an ounce.
© Thomson Reuters 2016