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Gold price registers first loss in 3 sessions as post-Brexit volatility eases

June 28, 2016

San Francisco (Jun 28)  Gold futures ended lower after two consecutive days of gains as haven investments lost some traction following a tentative return of risk appetite, three days after the U.K. voted to exit the European Union.

The decision, dubbed Brexit, has roiled global markets since Friday, driving investors out of assets perceived as risky and into havens like gold

But on Tuesday, stock markets steadied, diminishing the appeal of assets like gold, which is traditionally viewed as a port in a storm.

“Given the rapid rise in gold prices from the Brexit results of around $80 per ounce, some profit taking. is a positive signal for a longer-term bullish trend in gold prices,” Anthem Blanchard, chief executive officer of Anthem Vault, told MarketWatch.

“The primary focus of global markets will likely be on further European Union instability in the form of a euro-accepting member potentially exiting the EU next,” he said. Uncertainty in the markets can lure more investors to gold.

On Tuesday, August gold GCQ6, -0.77%  fell $6.80, or 0.5%, to settle at $1,317.90 an ounce after closing at $1,324.70 an ounce Monday, the highest settlement level since July 11, 2014.

Read: This ‘rock star’ gold play is about to catch its breath—then roar higher

Among the exchange-traded funds, the SPDR Gold Trust GLD, -1.07% fell 0.8% by the time gold prices settled. The VanEck Vectors Gold Miners ETF GDX, -1.70%  shed 1.8%.

“Markets calmed today, with sterling and U.K. stocks finding a footing, and risk-off positioning unwinding some,” said Ronald Simpson, currency analyst with Action Economics. He noted that the “Bank of England injected 3.1 billion pounds into U.K. banks, South Korea announced a $17 billion stimulus package, Chinese President Li said that he won’t allow a roller-coaster ride in Chinese capital markets and other leaders attempted to assuage investor concerns.”

Gold futures briefly traded near the session’s lows after data Tuesday showed that U.S. consumer confidence took a step higher in June, but the figures covered a time before the Brexit vote.

Another report revealed that the U.S. economy’s annual growth rate in the first quarter was raised again to 1.1%, still one of the weakest performances in the past several years. The reading was assumed by most analysts to help keep the Federal Reserve off the interest-rate trigger for now. Gold tends to lose value in a higher interest-rate environment.

‘With rate hikes likely off the table for the indefinite future…real rates are likely to go negative again and confirm this bull market in gold.’
Josh Crumb, GoldMoney 

“With rate hikes likely off the table for the indefinite future, despite a pickup in U.S. inflation, and now more reports of emergency liquidity and ‘whatever it takes’ commitment from central banks, real rates are likely to go negative again and confirm this bull market in gold,” said Josh Crumb, co-founder and chief strategy officer at GoldMoney.

The U.S. Dollar Index DXY, -0.26%  fell 0.3%. The dollar and gold often move in opposite directions, but not so in the immediate wake of the so-called Brexit vote. The dollar has tended to rise and fall based on pound and euro movements, unhooking the currency, at least in the short term, from its typically inverse relationship with gold.

Read: Why gold may hit $1,500 by year’s end—and it’s not just about Brexit

In other metals trading Tuesday, September silver SIU6, +0.36%  diverged from gold to finish up 10.3 cents, or 0.6%, at $17.889 an ounce. September copper HGU6, +2.47%  gained 5 cents, or 2.4%, to $2.176 a pound.

October platinum PLV6, +0.23%  shed a dime to $980.60 an ounce, while September palladium PAU6, +2.04%  gained $12.55, or 2.3%, to $569.95 an ounce.

Source: MarketWatch

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