Odds of a BREXIT are drifting at the bookmakers, with REMAIN a firm 1 to 4 favorite. Fears of a BREXIT have been driving demand for gold and a REMAIN vote is likely to spur a sell-off.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Breakout above resistance at $1300/ounce turned into a bull trap with a sharp retreat to support at $1250/$1260. A REMAIN vote on June 23rd would test support at $1250 and possibly $1200. But the up-trend remains intact if support at $1200 holds.
Political uncertainty is unlikely to fade before the November US election. And economic uncertainty, fueled by Chinese instability, is likely to last a lot longer.
Capital outflows from China continue, with USDCNY running into resistance at 6.60. This is a sign that PBOC sale of foreign reserves has resumed, weakening the Dollar and boosting demand for Gold.
Gold’s up-trend is likely to continue. And breakout above $1300 would offer a long-term target of $1550/ounce*.
Disclosure: Our Australian managed portfolios are invested in gold stocks.