Gold prices were lower Tuesday as traders have once again shifted to a "risk-on" perspective due to two main factors: a lower likelihood of the Federal Reserve raising interest rates any time soon, and more muted chances of Britain leaving the European Union in this Thursday's nationwide referendum.
In response, spot gold fell 1.8% to $1,267/oz during early trading. Silver prices also fell by more than 1.5%, losing about 30¢ to trade below $17.30/oz.
Congress Grills Yellen
As is often the case, the markets are responding acutely to the pulse of the Fed and its outlook on interest rates. Chair Yellen is slated to appear before the Senate Banking Committee this morning to hold a question-and-answer session with lawmakers about how the central bank sees its policies unfolding in the context of the global economy.
Most experts aren't expecting a great deal of fireworks from Yellen's biannual testimony. She already spoke extensively to reporters following the two-day meeting of the Federal Reserve Open Market Committee (FOMC). Not only did the FOMC decide not to move the federal funds rate, but many of the committee's members dialed back their projections for the pace at which the key interest rate would increase over the course of 2017 and 2018.
This more dovish rate outlook from the Fed is like candy to the stock markets, which have rebounded from four consecutive trading sessions in the red prior to this week. Wall St opened higher on Tuesday after yesterday's gains. For the second straight day, global equities were also predominantly in the green. This is no doubt fueled by Fed's position that interest rates will remain lower for longer.
In the other "outside markets" that tend to impact precious metal prices, the dollar was about unchanged this morning. The greenback has been slumping over the past four trading sessions, falling right along with stocks. Meanwhile, the British pound is at its strongest level since early January, a move based largely upon more subdued expectations about whether Britain will indeed vote for a Brexit on Thursday.
Crude oil prices have pulled back after a recent string of strong gains. This jump in the energy market followed a one-month low for Brent crude and WTI crude last Thursday. Speculative long positions in the oil market have fallen by the most in over a year.
Brexit Less Likely
The looming Brexit vote in the U.K. is still apparently too close to call just two days out from the official referendum. Before Labour MP Jo Cox was assassinated in broad daylight last week, the scales appeared to be tilting toward "Leave," but the vehement arguments in favor of the U.K. abandoning the EU have softened since the tragedy. This has directly impacted the gold market, as the yellow metal saw a strong wave of safe-haven demand due to the uncertainty accompanying a potential Brexit.
Support for gold prices seems to be at $1,266/oz and $1,260/oz, while new resistance levels have apparently formed at $1,272/oz and $1,278/oz above that. If spot gold moves above the latter or below the former, it could portend which direction prices will trend over the near term.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.