Gold Price Rebounds as Stocks, Crude Oil Reverse Gains, UK Brexit 'Not a Tail Risk'

GOLD PRICE losses of 1.7% from yesterday were reversed in Asian and London trade Tuesday, taking the metal back above $1220 per ounce as world stock markets reversed Monday's rally, as did crude oil.

 

The British Pound slipped again near 7-year lows on the currency market as CEOs and directors from 34 of the largest 100 companies listed on the London Stock Exchange called for UK voters to stay in the EU, avoiding Brexit.

 

The LBMA gold price today set a new 13-month high for UK traders at the morning auction, fixing above £863.46 per ounce – just 2 pence shy of January 2015's then 16-month peak.

 

"If you think the Brexit risk is not such a 'tail-risk'," says one bullion bank's salesdesk, using a term for low probability events, "then it may make sense to add diversification to a balanced portfolio...despite the current perception of rich prices."

 

For Dollar gold prices, "2015-2016 resistance line should now offer support circa $1197," says the latest Bullion Weekly Technicals from Commerzbank's chart analyst Karen Jones.

 

"Gold defended its territory yesterday despite rising stock markets and a firmer US Dollar," adds the German financial services group's commodities team.

 

"We still maintain our view that gold needs to be traded inversely against both US stocks and oil," says Ed Meir at US brokerage INTL FCStone, "as these two complexes seem to be the dominant variables."

 

The quantity of gold needed to back shares in the SPDR Gold Trust (NYSEArca:GLD) rose yet again Monday, reaching an 11-month high of 752 tonnes – some 45% below end-2012's peak – but marking only the 6th addition so far this year on a day when gold prices fell.

 

The opposite – of rising prices seeing an outflow from the GLD – has only happened once, on 6 January.

 

February's surge in world gold prices – the strongest since August 2011 on a daily average basis – has badly dented imports to world No.1 consumer market India, Reuters quotes "sources", perhaps knocking inflows two-thirds below January's level as local retailers struggle to offload inventory even at $50 per ounce discounts to world prices.

 

The world's larget minerals business, BHP Billiton today slashed its interim dividend to shareholders by 75% after reporting its first half-annual loss in 16 years, predicting still "weaker prices and high volatility" to come for iron, copper and oil.

 

South Africa's 3rd largest gold producer, Harmony (JSE:HAR) today said it's locking in the current record-high price of bullion in Rand terms on one-third of this year's expected output, hedging its currency risk against the US Dollar to cover $400 million of sales.