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    Intermarket analysis: Gold extends gains on safe-haven demand Ani Salama

    Gold extended gains on Tuesday, underpinned by safe-haven demand, as growing uncertainty surrounding the Brexit vote and fading hopes of a summer rate hike by the Fed have boosted demand for safe-haven assets.The yellow metal reached a peak near $1,290 an ounce, before pulling back slightly.The yield on the US 10-year government note fell to 1.587% on Tuesday, near a record low, while the yield on German 10-year Bunds fell below zero to -0.032%, for the first time on record, evidencing the run to safety.  Continued bond purchases from the ECB and the BoJ are adding further pressure to yields. Yields fall as bond prices rise.Looking at the VIX, a measure of volatility in the US stock market, the index reached its highest level since February today, also consistent with the risk aversion environment.      The Federal Reserve starts its two-day policy meeting today. Implied probability of a June rate hike is now less than 2%, while July’s odds are around 18%. Fears of a Brexit are also complicating Fed plans and could delay next hike despite the latest string of robust US data, including today’s retail sales figures.All the above continues to contribute to the yellow metal’s appeal.  In an environment of low interest rates investors are less attracted to bonds, and turn into the no-yielding shining gold.


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