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TDS: Gold To Move Toward $1,392, Silver To Test $20 If U.K. Votes To Leave EU

TD Securities looks for gold to surge higher if U.K. voters decide on June 23 to leave the European Union in the so-called Brexit decision. “Under a ‘leave’ scenario, TD Securities expects gold to trend past the recent highs and move toward $1,392/oz, with the more volatile silver testing the $20/oz mark,” the firm says in a research note just ahead of the weekend. “However, should the vote be to remain in the European union, a swift correction but no rout would ensue.” Due to a “considerable degree of uncertainty” surrounding the Brexit vote, potential for a loss of risk appetite in capital markets appears increasingly likely, TDS adds. Since a vote to leave the European Union would have a negative impact on economic activity and investor confidence, this likely would precipitate equity-market turmoil, “even more heroic” simulative measures by the European Central Bank, and Federal Reserve reluctance to tighten U.S. monetary policy, TDS says. However, even if the U.K. stays in EU, any pullback in gold may be limited since the Fed likely will remain slow to lift rates, with traders also worries about long-term stability of the EU, TDS adds.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Societe Generale: Chinese, Russian Central-Bank Gold Purchases Likely To Continue

Monday June 13, 2016 09:06
 
There has been some divergence in central-bank gold activity, but those buying to diversify reverses are likely to keep doing so, even though the pace may slow, says Societe Generale. Venezuela sold 88 tonnes of gold in 2015 and 43 in the first quarter, says Societe Generale, citing data from the International Monetary Fund. The cash-strapped country “has limited other resources to fall back on at present,” Societe Generale continues. Meanwhile, Russia bought another 62 tonnes in the first quarter, as the country and China both seek to diversify assets. The bank points out there is a major difference in gold reserves of these nations – Russia and China held 15.7% and 2.3% of their reserves in gold over the last 12 months, respectively, while Venezuela stood at 65.9%. Despite sales by Venezuela and potentially other Latin American nations, Societe Generale says it does not envision a “return to sales levels witnessed at the peaks of the decade either side of the millennium,” especially signatory nations in the Central Bank Gold Agreement. Analysts add, “we do expect to see China to continue making fresh purchases at the current high levels throughout the rest of this year, while Russia will continue to buy, but it's higher percentage of reserves and severe economic recession may mean the pace slows.” 

By Allen Sykora of Kitco News; asykora@kitco.com

 

BBH: Approaching U.K. Referendum Dominant Factor In Capital Markets

Monday June 13, 2016 08:35

The risk that the U.K. votes to leave the European Union next week is the dominant force in markets as a new week gets under way, says Brown Brothers Harriman. Sterling fell 1.4% against the U.S. dollar before the weekend and is off another 1% early Monday, the firm says. A week ago, it traded as high as $1.4530.  Shortly after 8 a.m. EDT, it was trading around $1.4170. There have been several polls showing those wanting to leave as ahead, BBH points out. “The event markets show an elevated risk, but still favor those that want to remain in the EU,” BBH says. “The bookmakers in the U.K. have also tightened the odds, but also favor the remain camp.”  In the week through last Tuesday, speculators piled into short sterling positions by the most in five years, BBH points out. “Short-dated implied sterling volatility is soaring.  Consider that before the weekend, two-week volatility stood at 31%, which was double the previous close as the referendum moved within the two-week time frame.  The vol is now quoted near 38%.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

SP Angel: Gold Climbs On Safe-Haven Demand, Risk Aversion

Monday June 13, 2016 08:34

Gold prices have hit their highest level in nearly a month, with broker SP Angel citing prospects for low interest rates and as oil, a the U.S. dollar and equities pull back. The firm describes markets as in a “cautious mood,” adding that “heightened risk of Brexit” may be adding to this. Brexit refers to an upcoming vote on whether the U.K. will exit the European Union. “Chances of the Fed hiking rates on Wednesday are, nil according to Fed funds futures tracked by Bloomberg,” SP Angel adds. The firm adds that holdings of gold by exchange-traded funds have now climbed above 60 million ounces. As of 8:21 a.m. EDT, Comex August gold was $11.20 higher to $1,287.10 an ounce and peaked at $1,289.60, its most muscular level since May 16.

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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