Gold increased by 1% on June 1st, 2016, heading for a fifth weekly gain. It was assisted by a weaker dollar and the possibilities for more monetary policy easing, post-Brexit.
Safe-haven demand for gold stimulated a major portion of the gains as investors moved to safeguard themselves against the uneasiness in the lead up to Brexit.
Fears over the path of global growth, the Fed’s dovish outlook and retail demand had supported gold prior to Brexit.
The spot gold rate increased to a session high of $1,341.40 an ounce. It was 1.5% higher at $1,341.76.
The metal registered a gain of 8.8% in June. It has been its largest monthly increase since February. The US gold futures for the delivery in August moved up 1.4% at $1,339.
The strength in gold proved beneficial for silver. It breached the $19 an ounce level. In the past, it had breached that level in September 2014. It increased by 5% to $19.64 and traded 4.9% higher at $19.61.
In the near future, the US dollar and the dollar-denominated metals would in focus. The attention would shift from Brexit towards economic fundamentals and the US monetary policy.
Concerns pertaining to the global economy have made prospects of a rate increase in the US less likely in the near term.
A robust jobs data and favourable modifications for the June nonfarm payrolls data could boost the dollar and weaken gold and silver, at least temporarily.
The low-interest rates in the US would benefit gold since the opportunity cost of managing it reduces and the dollar normally decreases, resulting in the metal becoming inexpensive.
Societe Generale (a multinational banking and financial services firm based in France) increased its gold price forecasts due to concerns regarding the political & the economic fallout of Brexit.
It is projected that gold would be one of the key beneficiaries against the existing global economic environment. Any increase in volatility and continuing uncertainty would ensure the investors risk taking capability would be in check.