Brexit Puts the Glitter in Gold
As the United Kingdom’s surprise
vote to leave the European Union sent financial markets into a risk-on
sell-off, investors flocked to the world’s oldest safe haven: gold. The price
of the yellow metal rose 6 percent from a low of $1,256.50 an ounce on June 23,
the day of the referendum, to a high of $1,336.88 on June 24, blowing through
two key technical thresholds of $1,304 per ounce and $1,333 per ounce along the
way. Technical analysts on Credit Suisse’s Global Markets team say prices are
likely to keep rising from here, ultimately reaching $1,380 an ounce, which
would be a two-year high. Precious metals analysts on the Global Markets team
note that the uncertain macroeconomic environment, currency volatility, lower
yields in the developed world, and the potential for additional quantitative
easing from central banks create nearly ideal conditions for a bull market
rally, and that the sense of global unease pushing gold prices higher is likely
to continue through the U.S. elections in November. While gold exchange-traded
funds have added 14.2 million ounces of gold to their holdings so far in 2016,
the 61.2 million ounces in their vaults would have to increase 38 percent to
reach the peak of 84.62 million ounces in 2012. In other words, there are
plenty of reasons the gold rally may have further to run.
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As
the United Kingdom’s surprise vote to leave the European Union sent
financial markets into a risk-on sell-off, investors flocked to the
world’s oldest safe haven: gold. The price of the yellow metal rose 6
percent from a low of $1,256.50 an ounce on June 23, the day of the
referendum, to a high of $1,336.88 on June 24, blowing through two key
technical thresholds of $1,304 per ounce and $1,333 per ounce along the
way. Technical analysts on Credit Suisse’s Global Markets team say
prices are likely to keep rising from here, ultimately reaching $1,380
an ounce, which would be a two-year high. Precious metals analysts on
the Global Markets team note that the uncertain macroeconomic
environment, currency volatility, lower yields in the developed world,
and the potential for additional quantitative easing from central banks
create nearly ideal conditions for a bull market rally, and that the
sense of global unease pushing gold prices higher is likely to continue
through the U.S. elections in November. While gold exchange-traded funds
have added 14.2 million ounces of gold to their holdings so far in
2016, the 61.2 million ounces in their vaults would have to increase 38
percent to reach the peak of 84.62 million ounces in 2012. In other
words, there are plenty of reasons the gold rally may have further to
run. - See more at:
https://www.thefinancialist.com/spark/brexit-puts-the-glitter-in-gold/?utm_source=Newsletter&utm_medium=email&utm_campaign=Newsletter&utm_content=Newsletter#sthash.GO5zmzLQ.dpuf
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