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Gold Prices Reach 2-Week Low as Brexit Fears Simmer

June 22, 2016 at 17:27 by Andrew Moran

Gold prices suffered their fourth consecutive loss on Wednesday. The yellow metal has been losing its momentum in the last week as investor fears over a potential Brexit simmer ahead of June 23’s historic referendum.

August gold futures declined 0.24%, or $3.10, to $1,267.40 per ounce at 17:00 GMT. The last time gold prices traded this low was on June 8. Gold was recently on the verge of surpassing $1,300 an ounce before retreating.

Meanwhile, July silver prices dipped 0.06%, or $0.01, to $17.30 an ounce.

Gold had been climbing in the first half of June because of weak US and global economic data and concerns that Britain would be leaving the European Union (EU). With most of the latest polls suggesting that Britons will vote to remain in the EU, gold’s status as a safe haven investment has mildly diminished.

Gold was also surging because the Federal Reserve was not going to be raising interest rates in June — the latest odds suggest there is a 10% chance of a rate hike in July, according to the CME Group FedWatch tool. Higher interest rates tend to hurt gold because investors seek out higher yields in a rising rate environment and the dollar denominated metals do not pay out interest.

Janet Yellen, the 15th Fed Chair, delivered her semiannual monetary policy testimony to Congress on Tuesday, which revealed very little about the US central bank’s intentions regarding interest rates. She also declined to take a position on Brexit, but she did warn about potential economic consequences should the UK decide to leave the European trading bloc.

I am not attempting to take a stand. They are going to go to the polls, they have had an active debate on the issues and I am not providing advice in that sense…. It is for them to decide. I am simply saying the decision could have economic consequences that would be relevant to the US economic outlook… There is uncertainty but this is a unique event that has no close parallel. It is hard to know what the consequences would be — of course there is always uncertainty both domestically and globally, we operate in an uncertain environment…We will closely monitor what the economic consequences would be and are prepared to act in light of that assessment.

Yellen continued her two-day testimony on Capitol Hill on Wednesday.

If you have any questions and comments on the commodities today, use the form below to reply.

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