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Gold falls as investors book profits after Brexit-driven rally

Tue, Jun 28, 2016 - 4:04 PM

Gold fell on Tuesday as investors booked profits, two days after the yellow metal rallied to its highest since March 2014 thanks to safe-haven demand in the wake of Britain's decision to exit the European Union.

PHOTO: BLOOMBERG

[BENGALURU] Gold fell on Tuesday as investors booked profits, two days after the yellow metal rallied to its highest since March 2014 thanks to safe-haven demand in the wake of Britain's decision to exit the European Union.

Gold soared as much as 8 per cent to US$1,358.20 on Friday, the highest since March 2014, and had ended up 4.8 per cent, its biggest one-day gain since January 2009 as the British vote drove investors toward safer assets.

Investors, however, scooped up beaten down assets on Tuesday as sterling and Asian emerging market currencies regained some footing and crude oil bounced, bringing down the demand for gold. The safe haven asset is often perceived as a hedge against economic and financial risk.

Spot gold was down 0.7 per cent to US$1,315.16 an ounce by 0719 GMT. It rose 0.7 per cent on Monday.

Market voices on:

"So far it has mainly been Chinese selling. They have been good sellers the whole way up, especially when we passed US$1,300. We continue to see decent selling from them," said MKS Group trader Alex Thorndike.

"It seems like the market is pausing here a bit now considering the moves we have seen since Friday. But in a couple of weeks I think we could see prices in the US$1,375-US$1,400 range."

British bank Standard Chartered, however, said the gold rally has lost its momentum and it would be difficult for the metal to float above US$1,300 an ounce.

"Once the immediate short-run rush to safety subsides and assuming effective policy responses to allay capital market concerns, we think gold will struggle to stay above US$1,300/oz during Q3, and will push back down towards USD 1,250/oz," the bank said in a note.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.40 per cent to 947.38 tonnes on Monday, the highest since July 2013.

Among other precious metals, spot silver was down 0.5 per cent to US$17.64 per ounce.

Silver may break a resistance zone of US$18.12 to US$18.84 per ounce and rise into a range of US$21.09 to US$22.07 over the next three months, as indicated by a few Fibonacci retracement analyses, Reuters technical analyst Wang Tao said.

Platinum rose 0.2 per cent to US$975.75 an ounce and palladium was up 0.6 per cent at US$558.40.