Gold Surges on Brexit Fallout: Can It Hold On?



Gold surges yet again

The price of gold has risen 23% year-to-date as of June 24, 2016, making it one of the best-performing commodities so far this year. Most of the gains in gold can be attributed to its safe-haven appeal.

At the beginning of the year, global uncertainty reinstated gold’s safe-haven appeal. Gold strengthened more as the Fed’s tone became dovish on weaker US economic data.

Gold also rose in anticipation of the Brexit vote on June 23. But when opinion polls started suggesting a “remain” result, gold pulled back. Then the Brexit vote to leave the European Union came as a surprise, and the Markets hadn’t priced it in, either in gold (GLD) or gold equities (GDX).

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Risk-off sentiment

This led to a strong risk-off sentiment in the Market. Risk assets took a beating, and stable and safe-haven assets such as the US dollar, the Japanese yen, and gold marched ahead. The utilities sector (XLU) was the only GICS (Global Industry Classification Standard) sector ETF that posted a gain. The move higher was supported by ~$400 million in inflows.

Gold miners gain

The surge in gold prices was also reflected in gains for gold miners. Gold miners are essentially a leveraged play on gold prices and tend to magnify their weakness or strength. Iamgold (IAG), Coeur Mining (CDE), Harmony Gold (HMY), Kinross Gold (KGC), and Yamana Gold (AUY) have shown the highest leverage to gold prices since the start of the year.

In this series, we’ll see what course gold prices are expected to take for the rest of the year in light of recent developments.

We’ll start by looking at analysts’ opinions on gold prices.


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