gold demand

Gold Eases As Stocks Snap Back

June 28th, 2016 by

Gold prices were slightly lower this morning, settling around $1,315/oz. This means that gold is virtually flat from where it closed last Friday when markets first reacted to the news that Great Britain voted to leave the U.K.

Meanwhile, spot silver was flat at $17.80/oz. Platinum was also about unchanged at $975/oz while its cousin palladium gained 1.6% to over $560/oz.

Monday Market Recap

Gold-BarsAugust gold futures settled at $1,324.70 an ounce Monday, up $2.30 (+0.2%). Periodic profit taking made for a choppy day. Spot gold gained $8.50 (0.65%) for the day, ending at $1,324.10/oz. Gold’s $59 gain on Friday was the largest one-day jump since September 2013.

The gold speculators made bank over the Brexit vote, as the CFTC reported that net speculative longs hit a historic high. This was a 9% increase from the previous week, and came as gold prices slid under pressure from the “slam dunk” everyone expected from the Remain side on the Brexit vote. Gross longs were a whisker under 275,000 contracts on the week.

Last year’s high point for the gold price was $1,392/oz; some experts think it will return to this level before the dust clears on the Brexit mess. For perspective, this is far cry from the yellow metal’s five-year low of $1,057/oz notched this past December.

Outside Markets

Global stocks are looking to regain their footing after taking a beating following Brexit. Benchmark stock indices in London, Paris, and Europe were 3% higher during trading this morning.

Sovereign debt is also seeing intense safe haven demand, with the yield on the 10-year Treasury dropping 10 basis points to 1.46%, a four-year low. The German 10-year bund saw its yield fall by 7 basis points to -0.12%. British 10-year bond yields fell below 1% for the first time ever.

Source: Wall Street Journal

Source: Wall Street Journal

The dollar and yen both saw safe haven demand yesterday, as the pound sterling fell 3.4% to new 30-year lows to trade around $1.32. Some analysts are predicting a good chance for the pound to hit dollar parity for the first time in history by the end of the year. The euro also fell, easing against the greenback by nearly 1%.

Wall St experienced its worst two-day fall in nearly ten months on Monday. The Dow shed 260 points after a loss of a staggering 611 points on Friday. The S&P 500 fell nearly 37 points (-1.81%) after giving up 3.6% Friday, and the Nasdaq lost 2.4% after losing 4.1% Friday.

gold demandLooking back, European stocks took another beating Monday, falling by 4.1%. Combined with Friday’s 7% loss, the STOXX Europe 600 has had the worst two-day drop in history. The FTSE 100 in London lost another 2.6%. Volume in Europe was more than double the 30-day average.

Crude futures took another tumble Monday, as fears of a global recession due to Brexit rocked markets. WTI settled at $46.33 a barrel, down 2.8%. August contracts for Brent crude dropped 2.6% to end at $47.16, a 7-week low.

Technical Outlook

The next key resistance level that gold traders are looking at is $1,320/oz, so any move above this level could signal another run-up for spot prices. Meanwhile, support is being seen at $1,312/oz and then $1,300/oz below that.

 

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