What Gold Prices Will Be Important To Watch After Brexit?By Neils Christensen of Kitco News
Friday June 24, 2016 10:05
(Kitco News) - Overnight gold futures rallied to their highest level in more than two years and analysts say that the technical picture favors higher prices as markets continue to react to Britons voting to leave the European Union.
High market volatility, which saw the British pound fall to 30-year lows in its biggest one-day move in history, promoted investors to seek out safe-havens, driving gold to $1,362.10 an ounce, its highest level since March 2014. Although the market is off its highs, it is still holding on to most of its gains with August Comex gold futures last trading at $1,319.80 an ounce, up 4.5% on the day.
Looking ahead, some analysts see this as just the start of a new momentum shift that will ultimately drive prices higher.
“This market is not going to settle down anytime soon and I think the risk of the unknown is going to keep gold well supported into the summer,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Hansen said that the Brexit vote has created a new trading channel with support at $1,275 and resistance at $1,375. He added that because of massive volume in the gold space, prices could even rise to his outside target of $1,400 an ounce.
Darin Newsom, senior technical analyst at Telvent DTN said that $1,355 an ounce is the resistance level he is currently watching. He added that a drive above that level could lead to testing resistance at $1,396 and even $1,446, which represents the 50% retracement level of long-term bear market.
Newsome added that because of strong market sentiment he sees markets well supported above $1,300 an ounce.
“I think we are going to see prices remain at their current levels for a while,” he said. “With so much investor demand I think this market will be well supported.”
Phillip Streible, senior market analyst at RJO Futures, said that investors should watch last week’s previous high at $1,318 as this will represent the first technical support area. However he added that he expects $1,300 to hold as investors buy on the dips.
“After the dust settled from the overnight chaos we are only above last week’s highs by a few dollars,” he said. “To me that is a sign that gold is still undervalued at this point. I think $1,400 to $1,450 represents a more realistic fair value,” he said.
Kitco’s senior technical analyst Jim Wyckoff noted that at the first major resistance level to watch will be $1,350 an ounce with major support coming in at $1,308 as these present major buy and sell stop levels.