Amid the developments of the financial market associated with the outcome of British referendum, demand for safe-haven assets, such as the Yen and gold continues to grow.
Financial market conditions have tightened, which was confirmed by the statement of New York Fed President, William Dudley, who said yesterday that the decision of the UK to leave the EU created uncertainty about the prospects for the US monetary policy.
According to Mr. Dadley, prior to making interest rate decisions, it is necessary to wait for the macro-economic data on the state of the American economy, as it is impossible to predict further developments of the US economy after the Brexit.
Before Brexit, it was expected that the US Fed would increase interest rates this summer and such plan had supported the USD and prevented extensive rise in gold.
Now, given Brexit and the US statistics, which have deteriorated even before the UK referendum, investors doubt that the Fed will raise rates this year.
This fact provokes the rise in gold prices. The demand for gold usually increases during the periods of low interest rates and turbulence in the financial markets.
During the period of high interest rates, gold cannot compete with the profitable assets, because gold does not bring interest income, and borrowing costs for its storage and purchase are increasing. Investors expect that the price of gold can reach $1400.00 per ounce by the end of the year. However, judging by the pace of the rise, the price of gold can reach the level of 1400.00 far earlier.
Today at 20:00 (GMT 2), minutes of FOMC meeting in June will be released. Market participants hope that it will contain some indications on the prospects of the interest rate increase in the USA, which will affect the price of the USD and gold.