Gold Futures Edge Lower Amid Improved Risk Sentiment; Brexit Dangers Still Seen Looming

Gold futures declined Tuesday, as risk sentiment improved in the financial markets after Brexit fears triggered a massive selloff in global equities.

Gold for August delivery found a daily bottom at $1,308.20 a troy ounce on the Comex division of the New York Mercantile Exchange. It would later recover at $1,317.90 a troy ounce, declining $6.80 or 0.5%.

Despite the decline, gold prices are trading near their highest level since 2014. Gold experienced a massive rally last Friday in the wake of the United Kingdom’s vote to leave the EU. The yellow metal has a favourable outlook according to the technical indicators and fundamental outlook.

Silver futures reached their highest level since January 2015, buoyed by a weak US dollar. The September futures contract edged up 4 cents or 0.4% to close at $17.85 a troy ounce, outdoing its previous high of $17.84.

The US dollar index, which normally trades inversely with precious metals, fell 0.4% to close at 96.12. The US currency spiked to more than three-month highs on Monday amid risk aversion and sharp declines in the British pound, which is one of the currencies tracked in the exchange-weighted index.

Gold futures took a backseat to equities on Tuesday, as investors bought oversold markets in Europe and North America. The Stoxx Europe 600 Index finished 3.3% higher on Tuesday. In New York, the S&P 500 Index rallied 1.8%.

Concerns about the health of the British economy following its decision to leave the EU will linger for a while longer. The vast majority of economists said that Brexit would adversely affect Britain’s short-term prospects. The long-term implications of Brexit are unclear. While David Cameron announced on Friday that he would step down as Prime Minister, there is no timetable in place for when the UK would negotiate a new trade deal with the EU.

Brexit has quickly emerged as the story of the year. It will continue to roil the financial markets for the foreseeable future, especially if the economic consequences of voting Leave are seen as negative.

A deluge of economic data could impact the financial markets on Wednesday. In Europe, market research firm GfK will release its latest forward-looking German consumer confidence survey. The German government will also release preliminary inflation data for June. Meanwhile, the Bank of England will report on net lending to individuals, consumer credit, and mortgage approvals. 

In the United States, reports on personal incomes and outlays, and pending home sales will make headlines.

Written exclusively for Gold-Eagle by Paul Rosenberg, market analyst for EconomicCalendar.com