LONDON, June 23 (Reuters) - Gold could have significant upside if Britain votes to leave the European Union on Thursday, Saxo Bank's head of commodity strategy said.

Ole Hansen said in the Reuters Global Gold Forum that the gold market has largely priced out the impact of a "Leave" vote.

The following are edited excerpts from the conversation.



Q: If we do see a Leave vote now, how much, if any, of the impact of that will already have been priced in

A: Gold's recovery this month was kicked off by the weak U.S. jobs report on June 3 and followed up by the dovish FOMC meeting on June 15. These events, combined with Brexit worries, helped trigger major buying activity from hedge funds.

Having seen the market retrace by roughly half of the June rally since last Thursday, I would argue that a Leave vote risk premium has almost been priced out of the market.

A Leave vote would most likely send a shockwave through financial markets while providing gold with a major boost. The initial winner would be gold priced in pounds and euros on the assumption the dollar would strengthen sharply against these.

Q: Why would gold benefit from a UK exit

A: Primarily due to the uncertainty and risk aversion hitting other asset classes, and the potential for a U.S. Fed funds rate hike being further delayed.

It could also bring the fear of contagion to other EU countries.

Q: If the vote is Remain, how significant could a retracement be, in your view

A: Some short-term volatility would hit all markets. The medium-term outlook for gold, however, remains supported and a Remain vote should not change this. We look for support to be established ahead of $1,200, potentially already at $1,245.

Q: Once this is out of the way, what are you expecting the big drivers of gold to be throughout the summer

A: The focus should fairly quickly return to the multiple supports coming from a dovish FOMC, the diversification/re-allocation story that's been driven by negative sovereign bond yields and concerns about global growth. We also have other event risks coming up, with the U.S. presidential election being the biggest of them.

(Reporting by Jan Harvey; Editing by Alexander Smith) ((jan.harvey@thomsonreuters.com; +44)(0)(207 542 7744; Reuters Messaging: jan.harvey.reuters.com@reuters.net))