Buyers Laughing To The Bank As Gold Surges Strongly After “Exit” Triumph

The price of the precious metal continues to gain support as risky assets are still heading down after Britain’s decision to leave the European Union last Friday. On Monday (27/6), gold prices rocketed to 1335.26 only an hour after the markets opened, up more than 0.9% from the last settlement.

Despite opinion polls before the referendum that showed either side in a position to win, the outcome has stunned much of Britain, Europe and the whole world. More seriously, after the vote, British Prime Minister David Cameron decided to resign. The results immediately rattled global financial markets and prompted investors to flock into safe haven assets like gold.

The U.S Dollar rose sharply on Friday in response to the win of the“Leave” campaign, as money flowed into the perceived safe-havens. Nevertheless, further increases could put  pressure on the Fed’s plan of tightening its monetary policy. Since a strong currency would be likely to pressurize U.S exports and reduce inflation – which is already below the Fed’s objective of 2%, the expectations are that the Fed may go slow on any planned interest rate hikes. Moreover, the stronger dollar would also bring financial volatility into emerging markets due to their large stocks of dollar-denominated debt.

Later today, the U.S. Department of Commerce is scheduled to publish the goods trade balance for May, which indicates the difference between exports and imports.  The data is estimated to come in at minus 59.5 billion, falling deeper into negative territory than the statistics in April. On the other hand, the U.S flash services PMI for June reported by Markit is expected to come in at 52.0, suggesting an expansion in comparison with the previous month.

The dollar index .DXY, which tracks the greenback against a basket of six major currencies, rocketed to 95.88, a 0.36% tick-up from the previous close.

gold d1

Fig. GOLD D1 Technical Chart

According to the daily chart, the yellow metal’s price is rallying strongly towards a retest of the high of 1358.24 from Friday. RSI (14) has been ticking up to 67.23, nearing the overbought territory, indicating that the bullish trend is quite strong. Two moving averages moving under the prices still support the long position. The commodity is anticipated to climb for some time.

Trade suggestion

Buy stop at 1330.00, Take profit at 1358.20, Stop loss at 1319.41

1 Comment



June 27, 2016  /  Reply

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