Gold has been highly volatile ahead of Thursday’s Brexit vote. Prices rose last week as the “Leave” campaign appeared to be gaining momentum, and then retreated over the last few days on growing expectations that the “Remain” side will prevail.
Whatever happens with the vote, BMO Capital Markets analyst Jessica Fung expects a pullback in gold in the “very” near term.
“Even if gold prices move up following a surprise ‘Brexit’ majority, we expect it would be quickly followed by a pullback on profit taking,” she said in a note.
Fung advised investors to buy gold on this anticipated pullback, as she believes the outlook for precious metals remains very strong this year. She noted the World Bank recently slashed its 2016 GDP growth estimate to 2.4 per cent (from 2.9 per cent). She also raised concerns about structural problems in China, noting its “growing dependence on state-led investments” to boost the economy.
“Our constructive view on precious metals this year is based on ongoing ‘safe haven demand,’ a.k.a. the ‘fear trade’ — looking beyond Fed meetings and factoring in continued weak demand globally that has already driven bond yields down this year,” Fung said.
