Decision of the British people to leave the EU has led to the increase in demand for safe-haven assets, such as the yen and precious metals, including gold.
Last Friday, futures for gold soared up to the two-year highs. At the end of trades at COMEX, August gold futures increased by 4.7%, up to the level of 1322.00 USD per ounce, showing the most significant one-day increase since September 2013.
UK decision to exit from the EU has also led to speculative purchase of gold in bars. At the opening of the trading session today, spot price of gold was at the level of 1323.00.
Although, since the beginning of the year, the price of gold rose 25% amid concerns of market participants about the prospects of the global economy and instability in financial markets, according to the Commission on urgent exchange trade, hedge funds and other speculative investors boosted the net long position on gold to the many-year highs.
The US Fed is very carefully when making a forecast on the number interest rate hikes in the United States planned this year.
In case of the rise in the interest rates in the USA, gold will be under pressure, as investments into this precious metal does not bring interest income, while borrowing costs for its purchase and storage are growing. In this situation, the attractiveness of the USD and Treasury bonds will increase while, the price of gold is drop.
Exit of the UK from the EU increases the uncertainty in the financial markets, which will constrain the US Fed from raising interest rates, and investors from sales of gold.
Apparently, the rise in gold prices will continue. Some market participants expect that the price of gold may reach $1.400 per ounce by the end of the year.
Only after the markets calm down and some positive US macroeconomic data will be released, the US Fed may resume to consider the possibility of the increase in interest rates in the USA. After that short positions may be possible.