Gold prices surged nearly 3% after the very poor jobs number on Friday, have maintained those gains and appear to be consolidating as concerns about the U.S. economy and BREXIT deepen.
Gold was marginally higher yesterday and 2.7% higher last week breaking a run of recent weekly losses and a 5% loss in May.
BREXIT concerns are gaining momentum after three recent polls suggested that the ‘leave’ side are gaining an advantage and a BREXIT looks more likely.
An ITV poll showed 45% for “Leave” and 41% for “Remain.” A survey by global market research company TNS showed 43 percent backing an EU exit, and 41 percent wanting to stay in. An online poll showed 48 percent supported leaving the EU, while 43 percent were in favor of remaining and 9 percent were undecided, according to ICM.
This is leading to concerns about a coming period of market volatility and turmoil. This should support gold and silver and indeed lead to gains on safe haven demand.
Sterling fell versus gold 1.2% yesterday – from £857 to £867.66 per ounce after the polls showed UK citizens favoured leaving the EU. That revived concerns the BREXIT referendum on June 23 will throw global markets into turmoil and severely undermine confidence in the already vulnerable, nascent EU super state.
The pound also dropped to a three-week low versus the dollar after the polls. While the pound pared its earlier declines, a gauge of anticipated swings against the dollar in the next month surged to the highest in at least seven years. One-month implied volatility in pound dollar trading rose above 22 percent, the highest since February 2009.
Gold has given up some of those gains since as sterling has recovered and as odd ‘fat finger’ trades helped sterling bounce overnight. Gold in sterling terms had risen 5.5% since the start of last week (May 30), due to increasing BREXIT concerns and the poor jobs number in the U.S.
Markets participants are preparing for turmoil. “The result is going to be announced at an awkward time, in the middle of the night,” said Joe Rundell, head of trading at ETX according to the BBC. “And we expect that whatever the result there will be significant movements on the FTSE 100, the sterling markets and in gold.”
Gold rallied 2.8% percent back above $1,245 on Friday after the very poor jobs number saw traders sell risk assets especially equities and allocate to safe haven assets.
The May employment report showed Americans returned to the labour market at their slowest pace in almost six years. The US non farm workforce added only 38,000, jobs missing the forecast of 160,000 and indicating that the US is in recession or heading to recession. Additionally, the March and April figures were revised 22,000 and 37,000 lower respectively.
Federal Reserve Chair Janet Yellen looks set to stay uber dovish and maintain ultra low monetary policies due to concerns about the U.S. economy, global economy and indeed BREXIT.
Yellen said at the weekend that the risk of Brexit is also weighing on the Fed’s interest rate decision. She warned that a UK vote to leave the European Union could badly impact the U.S. and global economy and affect the timing of the next interest rate rise. Market participants are concerned that the fragile U.S. and global recovery is spluttering and even a very small interest-rate increase of 25 basis points could derail the U.S. and global economies and lead to a recession.
A vote for BREXIT should see gold and silver rise sharply on a safe haven bid in futures markets and safe haven demand for bullion. A vote to remain would be expected to see gold and silver fall as risk appetite comes back into the market supporting equities and sterling. However, price weakness in the precious metals would likely be short term given the current strong supply and demand fundamentals for them.
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Breaking News and Commentary
Pound slides as polls show Brexit support, as Yellen hints at US rate rises – Bloomberg
Gold holds near two-week highs as cautious Yellen hurts dollar – Reuters
Asian Stocks Rise as Commodities in Bull Market – Bloomberg
Gold Futures Rise as Bets Mount That Fed Will Delay Rate Rise – Bloomberg
Gold futures close at 2-week high as Yellen ‘plays charades’ – Marketwatch
Cable Plunges After “Leave” Voters Overtake “Remain” In Latest Brexit Poll – Bloomberg
Bank of Montreal warns against other banks in gold business – Reuters via GATA
Massive Explosions Cripple Nigerian Oil Industry – Traders DNA
Why Big Job Misses Are Likely to Continue – Financial Sense
US Jobs Report: Rocket Fuel For Gold – 321 Gold
Read More Here
Gold Prices (LBMA AM)
07 June: USD 1,241.10, EUR 1,091.42 and GBP 851.02 per ounce
06 June: USD 1,240.55, EUR 1,092.67 and GBP 859.08 per ounce
03 June: USD 1,211.00, EUR 1,086.63 and GBP 839.34 per ounce
02 June: USD 1,215.50, EUR 1,085.32 and GBP 842.10 per ounce
01 June: USD 1,216.25, EUR 1,090.00 and GBP 841.77 per ounce
Silver Prices (LBMA)
07 June: USD 16.31, EUR 14.36 and GBP 11.18 per ounce
06 June: USD 16.40, EUR 14.47 and GBP 11.39 per ounce
03 June: USD 16.10, EUR 14.45 and GBP 11.17 per ounce
02 June: USD 15.98, EUR 14.27 and GBP 11.07 per ounce
01 June: USD 15.95, EUR 14.30 and GBP 11.04 per ounce
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