Brexit spillover likely in precious metals

June 21, 2016

Markets have been so far polarised by the Brexit vote as of late, and many pundits are now questioning what they will talk about once it is over. Certainly in this case risk sentiment will be key on the day of the polls and precious metals will likely be a prime candidate as a hedge in the marketplace. Looking at the present state of the gold market it seems that there is still strong buying based on the market sentiment we are seeing and gold bugs are still looking to claw back some gains from support levels at 1280 at present. The build up in gold won't go unnoticed at all, with many picking that gold will spike or suddenly drop in the event of a Brexit.

At this stage I am leaning towards Britian staying in the EU after the most recent polls which showed that there was support in the remain camp. With this in mind a drop in gold on the day if there is a remain vote would be the expected result, and I would anticipate that is exactly the case if we do see a 'remain vote' come about as the clear winner.  From the current support level at 1280 gold would likely look to spike lower to 1264 which is showing as the next level of support in the current market. Any crash lower than this is likely to be picking up by the 50 day moving average, and I expect traders will look to target this key level when it comes to fast flowing trades on a global event such as this.

Across the Ocean and the Canadian dollar continues to fly in the face of reason as it managed to claw back some further ground against the USD even as wholesale sales m/m came in lower than anticipated at  0.1% (0.5% exp); most of this gain however was in part to bullish oil movements which carried the Canadian dollar. The correlation though has looked much weaker lately, but for the most part it still remains and despite not being a perfect correlation, we still see oil movements very much affecting the Canadian dollar and will likely to remain so for some time. CAD buyers will be hoping it's not all bad luck with the upcoming retail sales m/m expected to show improvement with a forecast of 0.7%. This seems optimistic given the last two months have been quite weak, but many will be looking to see some positivity in the CAD in order to see if the USDCAD can indeed push down to 1.2459 in the long run.

 Despite all the recent drops for the USDCAD, I still remain bullish in the long run as the FED has not yet backed down from its hawkish statement and for the most part many in the FED expect inflation to return to 2% along with growth as well. For me the market is currently drifting towards 1.2685 and the bulls will be waiting with open eyes at this key level, and I anticipate buying pressure will be strong around this area as the market searches for a bargain. 

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