The global rush to safe-haven assets continued on Thursday as investors focused on next weekâ€™s looming referendum about whether the U.K. will maintain its membership in the European Union.
Gold prices hit a 22-month high, rising for the seventh-straight session and flirting with the $1,300-an-ounce level. The precious metal saw gains of 0.80% by the end of the session, adding to its more than 22% gains for the year.
Investors also snapped up U.S. Treasury bonds, seen as a safe haven, sending the yield on the 10-year note down more than 1.5%. Yields move in the opposite direction of prices. Global bond yields also extended their recent slides: The German 10-year Bund, which saw a negative yield for the first time ever last week, dropped to a record low of -0.035%, while British 10-year Gilt also fell to a record low.
Amid the rush to less-risky assets, global equity prices mostly saw declines. In the U.S., stocks traded around the flat line, while the pan-European STOXX Europe 600 index slid 0.72% on the session and the U.K.â€™s FTSE 100 slipped 0.27%. Markets in Asia closed the mid-week session sharply lower: Japanâ€™s Nikkei dropped 3.05%, and Hong Kongâ€™s Hang Seng declined 2.10%, while Chinaâ€™s Shanghai Composite saw less substantial losses of 0.50%.
Meanwhile, global oil prices saw sharp declines: U.S. crude dropped 3.75% to $46.21 a barrel, while Brent, the international benchmark, shed 3.63% to $47.19 a barrel.
Phil Flynn, PRICE Futures Group senior market analyst and FOX Business contributor, said whatâ€™s weighing most on the market is heightened fears about the future of interest-rate policy in the United States and polls out of the U.K. showing the â€œleaveâ€ vote gaining momentum.
â€œ[Fed Chief] Janet Yellen obviously did not inspire confidence in the global markets with her comments [on Wednesday], and other central bank actions around the globe are not either,â€ he said. â€œThe bottom line is that this Brexit vote is definitely raising concerns that it will push the globe into recession, at least in Europe.â€
At the conclusion of the Federal Open Market Committeeâ€™s two-day policy meeting Wednesday, interest-rate policy held steady, but the Fedâ€™s growth outlook for the U.S. was revised lower and Yellen said the looming Brexit vote was â€œone of the factorsâ€ in the committeeâ€™s monetary-policy decision.
Further, data released on Thursday from the Economist Intelligence Unit showed that if Britain were to leave the EU, the move would ignite a recession, and push GDP in the region down 6% by 2020.
â€œBritainâ€™s ability to maintain its role on the international stage would be called into question as the government would be drawn into a distracting and protracted renegotiation of its trade agreements,â€ the Economist Intelligence Unit reported. â€œFrom an economic perspective, the uncertainty caused by a leave vote would upset consumer and market sentiment, which could cause a 14-15% devaluation of the pound in 2016 and push the U.K. into recession in 2017."
While many market participants are expecting next Thursdayâ€™s vote to result in the U.K. maintaining its membership in the EU, Flynn said itâ€™s all the uncertainty surrounding the outcome thatâ€™s throwing a wrench into the global marketâ€™s recovery.
â€œIf they do leave, you look at the hard numbers and it shouldnâ€™t be a big deal. But it is a big deal because it creates uncertainty and we donâ€™t know whatâ€™s going to happen next, whoâ€™s going to be the next to leave [the EU]. It really is a big market issue,â€ he said.
Tensions surrounding the vote have been ratcheted up as June 23 nears. On Wednesday, Jo Cox, a member of British Parliament and the Labour Party, died after being shot and stabbed several timesin Leeds by an attacker who witnesses said shouted â€œBritain first,â€ a slogan used by activists supporting a â€œleaveâ€ vote. All campaign events by officials on both sides of the vote were suspended in the wake of the attack.