Brexit vote a real watershed moment that could send gold to $1,400, says ANZ
The June 23 Brexit referendum in the United Kingdom, in which voters will decide whether Britain should exit the European Union, has been boosting gold sales there, with one Reuters headline reading, London appetite for gold bars, coins rises on Brexit nerves.
And with physical bullion sales taking off as British investors hedge against Brexit blowback uncertainty, the Australia and New Zealand Banking Group likes golds prospects.
Gold bull set to resume bull cycle, a June 10 research note reads. Last weeks unexpectedly weak U.S. jobs data and subsequent cautious tone by [Federal Reserve Chairwoman Janet] Yellen has opened the door for gold to resume its bull cycle. However, Brexit could see gold push towards USD1,400/oz.
It called the Brexit vote a real watershed moment for gold. With market attention diverting away from the Fed, the impact of the referendum on the gold market is likely to be much greater.
Opinion polls remain divided, with both Remain and Leave camps ahead at various times. What is clear though is that the price of insuring against a collapse in the pound has hit a seven-year high. If the Leave campaign is successful, the expected collapse in the GBP and resultant market volatility would likely see investors seek safe haven assets. This could provide a massive boost to investor demand and would likely push gold towards USD1,400/oz.
ANZs stance is in line with HSBCs longstanding call that a Brexit would boost gold. Gold would also likely benefit from a sizable safe-haven bid in the event of a Brexit vote, HSBC analysts wrote in April.
As far as the geopolitical element, its certainly not a chicken little atmosphere, said Jim Steel, HSBCs chief precious-metals expert. I think theres enough uncertainty facing the global economy and even some geopolitical tensions to keep buying the gold market.