Gold targeting $1,350 or higher if Brexit prevails, analysts say

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The tragic killing of a British Parliament member Thursday pulled the rug out from under golds march to two-year highs above $1,310 as mourning over the senseless act cooled campaigning ahead of the contentious June 23 Brexit referendum.

Gold was trading near $1,294 by Friday afternoon, down from the $1,315 level touched Thursday in the wake of the Federal Reserve meeting and before the fatal shooting of MP Jo Cox. Still, the yellow metal was on course for its third weekly gain, and although Brexit fears have eased, the potential for turmoil remains high.

The Bank of England warned that uncertainty about the Brexit referendum is the largest immediate risk facing global financial markets, with adverse spill-overs to the global economy possible.

And although the IMF delayed a report on a Brexits economic ramifications out of respect for Coxs death, its director, Christine Lagarde, has warned that the risks are firmly to the downside. The fund has previously predicted that a Brexit could cause a stock-market crash, a steep drop in housing prices, and a potential recession.

Gold demand high in every corner: Despite golds pullback, bullish signs of life in the market persist. Open interest, a tally of outstanding contracts in Comex futures, rose to the highest in almost a month, Bloomberg reported. Meanwhile, holdings in gold-linked ETFs have risen for 13 straight days, and silver ETF holdings hit record highs.

European gold dealers are seeing huge demand, and even far from Great Britain, the U.S. Mints bullion sales were robust: On Thursday, 17,500 ounces of gold coins were sold one of the highest jumps of 2016 while 236,000 silver American Eagles were purchased, bringing year-to-date sales above 24.5 million, well on the way to a new sales record.

Brexit could send gold as high as $1,600: A Bloomberg survey of industry players predicted that if the Brexit is approved Thursday, gold could hit $1,350 within a week of the vote. Some bulls think the metal could go even higher, with Zee Gold DMCC chief Jeffrey Rhodes predicting $1,500 to $1,600. Conversely, the metal could dip if the UK chooses to remain, potentially anywhere from $1,250 to the $1,100 range, some analysts say.

But not so fast, other experts say. The Feds new low-rate stance is just one of the building blocks fueling gold beyond the Brexit vote. I dont think an In vote will lead to a collapse in the price of gold, David Govett of Marex Spectron Group told Bloomberg. Theres more to this rally than that.

Gold was rallying before Brexit became a significant possibility, and should continue to do so, added BMO Capital executive Tai Wong.

HSBC sees strong support at $1,220: HSBCs James Steel thinks gold can reach $1,400 if the Brexit is approved, but he sees the downside limited to $1,220 if the UK remains.

If a Brexit is rejected, gold would likely be well supported by a number of outside factors, Steel wrote. These include the ratcheting down in the number of anticipated Federal Reserve rate hikes since the beginning of the year, the uneven pace of global economic expansion, uncertainty associated with the U.S. election cycle, and other geopolitical risks not related to the UK vote. These factors may well act to buoy gold regardless of the results of the UK referendum.

Technicals suggest $1,450 ahead: And technical analyst Zev Spiro of Orips Research has been arguing that gold eventually is heading to $1,450 simply by looking at its technical chart patterns.

In March a positive signal occurred in gold as prices moved above the upper-channel line of a two-year-long descending channel, he said on the Futures Now show. The breakout signals higher prices with the minimum expected price objective in the $1,450 area. Now prices could actually trend beyond the minimum objective to test heavy overhead resistance in the $1,525-50 area. Overall outlook is positive, and prices are expected to trend to at least $1,450 within two to three months once we get going.