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Gold Shines Amidst Brexit Jitters

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Gold Shines Amidst Brexit Jitters
stacking-gold

Gold prices are probing new resistance at the $1,290 mark this morning, after another $10 gain in the spot price Monday. Gold prices are up over 5.8% in the last 8 trading sessions. Spot gold closed near the top of trading yesterday, ending at $1,283.80. Spot silver gained 13 cents to close at $17.41, up 0.72%

With the pound, euro, and yuan all diving today, the US dollar has been propped up to post solid gains in morning trading. The greenback hit a five-week low on Monday. Oil futures are down for a fourth day in a row, falling more than 1% in early trading.

German 10-year bonds are posting a negative yield for the first time in history this morning, as fears of Brexit contagion grow. Demand for the 10-year Treasury in the US saw yields hit a 3-1/2 year low yesterday.

All this market uncertainty over the Brexit is also supporting gold. Any headwinds that a stronger dollar may pose are more than negated by more major bonds yielding negative returns. Today's technical numbers show first resistance at $1,290, then $1,295. First support is at $1,280, then $1,278.

brexit

Brexit anxiety is pummeling the pound, as Britain's largest newspaper, the Sun, comes out with a front page headline advocating leaving the EU. As the Guardian notes, this move by the long-time Euroskeptic newspaper isn't surprising, as most of the Sun's readership are already in the "Leave" camp. That being the case, it is still a PR blow to the "Remain" side. British bonds (gilts) are being heavily bid this morning on market fears.

The pound is also being weighed down by large speculators betting on further declines.

Monday's Markets

Wall St. posted losses for the third straight session Monday, with the Dow falling 132 points, the S&P 500 down 17 points, and the Nasdaq dropping 46 points. These losses followed Asian and European stocks closing in the red.

Oil futures were down on fears of an economic slowdown in China, but continued pipeline bombings in Nigeria ensured that oil production there would remain at 22=year lows. WTI futures lost 19 cents to close at $48.88 a barrel. Just last week, prices were over $51 a barrel. Brent futures were also down 19 cents, to close at $50.35.

Gold futures settled at their highest point five weeks on Monday. August gold contracts rose $11 to $1,286.90 an ounce. July silver contracts gained 11cents to end at $17.44. Spot gold ended the day up by $10.50 to $1,283.80 (0.82%). Spot silver gained 13 cents to end at $17.41.

Federal Reserve Open Market Committee Meets Today

fomc

The two-day Federal Reserve Open Market Committee (FOMC) meeting started this morning, and will run until 2pm tomorrow. The release of the committee's statement will be followed bu a press conference by Fed leader Janet Yellen. Markets will still pay attention, trying to discern any clues regarding the timing of the next rate hike. Market indicators showed a 2% chance for a rate hike tomorrow, and an 18% chance for July.

However, there's finally something that scares the markets more than Yellen: Brexit. A Brexit will destroy any hopes for an economic recovery in Europe for at least a couple of years. We can't see any possible excuse for Yellen to raise interest rates tomorrow, with a potential global economic catastrophe eight days later.

 

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

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for SurvivalBlog.com.

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