Dubai: Gold’s massive rally following the Brexit vote over the weekend has created a new range for the precious metal but analysts are split on whether or not the $1,400 level will be breached anytime soon.

The bullion surged to a two-year high on Friday, trading as much as $1,362.60 an ounce, after the majority of British voters chose to leave the European Union (EU). The outcome of the Brexit polls had caught the financial markets off- guard and sent investors running toward the precious metal.

The surge in safe-haven demand is seen only as temporary, with some analysts saying that Friday’s panicking investors were merely overreacting to something that’s going to take some time to be implemented.

“The immediate reaction on the result was shock and uncertainty and the immediate price jump in gold was the typical run for security. This was most probably an overreaction,” Rolf Schneebeli, CEO of Gold Services AG, told Gulf News on Sunday.

Schneebeli pointed out that the actual exit from the European Union is going to take at least two years, considering the EU statutes. “For now, there is no change,” Schneebeli said. “The gold market, as all the other financial markets and probably most of the world, expected the UK to stay in. This was discounted and included in the price before the results came through.”

Karim Merchant, CEO of Pure Gold Jewellers, said he expects the precious metal to move on volatile path, but that there are indications that prices could continue to trade higher and test the $1,450 level  before the end of the year.

“Gold always acts as a safe haven in times of global turbulence and it’s done just that on Friday. We expect gold to remain very volatile, reacting to news on how the transition of the Brexit will take place. [But] I personally feel gold will now be range bound between $1,300 to $1,450 for the next quarter, so more upside to see,” Merchant told Gulf News.

As of 1.50pm, the precious metal in Dubai retailed by more than 4 per cent compared to last week’s prices. The rate of 24-karat gold stood at Dh159.50, up by Dh6.50 per gram from early trade on Thursday. Other gold pieces, such as 22K, 21K and 18K also retailed higher at Dh149.75, Dh143 and Dh122.50 per gram, respectively.

Ole Hansen, head of commodity strategy at Saxo Bank, echoed the observation that the decision to leave the EU caught the financial markets completely off-guard, given that the polls in the days leading up to Thursday had been indicating a win for the Remain camp. The decision caused the sterling, the US dollar, the German 10-year bund yields as well as the FTSE futures to fall.

“Gold benefited the most from this emerging chaos,” Hansen, however, said that there are “no compelling reasons to expect a major correction from here.”

“The latest rally is likely to have created a new range, some $75 above the previous one. Support should now be found between $1,300 and $1,275 per ounce with the medium-term target pointing towards the 2014 high just below $1,400 per ounce,” Hansen said.

However, while the EU economies, or the UK in particular, aren’t expected to “go over the cliff” because of the Brexit, Schneebeli said he expects interest rates in euro and pound for even longer. “The central bank will make sure there is no liquidity squeeze in addition. [For the short term] it is probably good to take any profit on short-term holding and buy back on lower levels once the market settles down,” he added.

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