Gold Defensive as Results of Brexit Vote Awaited

Gold remains defensive as markets await the outcome of today's Brexit vote. The yellow metal dipped to a new two-week low in early New York trading, with an assist from an unexpected drop in initial jobless claims last week.

Claims fell 18k to 259k, below expectations of 270k. However, a weak Chicago Fed National Activity Index tempered any optimism associated with the claims number. CFNAI fell to -0.51, vs 0.05. After a brief flurry of activity, the market switched right back to Brexit-watch mode.
If Brits vote to leave the EU, it is likely to reignite a haven bid in gold. There will be substantial uncertainty regarding the implications of such an outcome. The yellow metal set a nearly 2-year high at 1315.61 last week when the 'Leave' campaign was gaining momentum. That would be the first level of resistance to watch.

If UK voters opt to stay in the EU, I suspect the downside for gold will be limited. This week's retreat in gold is the result of a rebound in 'Stay' expectations. A vote to stay is a vote for the status quo, so market focus will shift back to the myriad of risks that have pushed gold up more than 19% so far this year.

Slow growth, low or nonexistent inflation, massive debt, and the resulting low/negative interest rate environment is where investors should be focused. If you haven't done so already, I encourage you to read Ben Hunt's latest Epsilon Theory newsletter, snippets of which I posted yesterday.