Brexit Vote Leans Stay And Gold Gets Hit By Risk On Sentiment

It made no difference that a weakening U.S. dollar against the euro lent some serious upside movement to gold. In the end, traders were selling, selling, selling and that has dragged gold down.

At 4PM in New York, gold is down a total of $7.70 per ounce. Silver is fighting to stay even while platinum and our favorite wild horse of precious metals – palladium – are both surging upward.

The dollar is down about a third of a percent against the euro. However, it is the British pound that is basking in the glow of a stronger chance that Britain will stay in its current euro-arrangement.

Crude is perhaps the most interesting trade of the day, with a steep draw in Cushing, Oklahoma, on stocks pushing prices up with a big assist from the Brexit news.

West Texas Intermediate is higher 2.70% while Brent North Sea is up 2.80%. But! Tomorrow is the expiry date for the July contract, so lots of maneuvering.

Overall, we are looking at much more fertile risk-on ground today than last week.

The three major European indexes all saw 3.00%+ jumps on the day. The London FTSE saw its best day since August of 2015. Pan-European average STOXX 600 closed up 3.65%, with all sectors reporting strength.

With Brexit polling abounding, it’s important to note that the winds could easily blow the other way before Thursday’s vote. The seemingly politically motivated murder of member of Parliament Jo Cox last week stunned the world and turned the polls away from exit. But we still have a few days to go.

Asian equities were also strong although Shanghai was up only a tenth of a percent. Traders in Asia liked the more positive mood on the Brexit issue. Because of that, the benchmark Nikkei was up about 2.35%.

In New York, stocks were about 1.00% higher, although they are well off the highs for the day. We think we saw some opportunistic selling into the early Dow rise of 270 points, an indication that some investors and traders may think the Brexit express has yet to reach the end of the line. NASDAQ made out the best on good pop by Apple, an important index component.

Reflective also of the risk-on day’s sentiment was a rise in the yield of U.S. 10-year bonds. We thought the yields were a bit squishy last week and today’s bond action may be expressing a mild adjustment.

Despite little to no demand for safe haven plays, the yen was up against the dollar, though only very slightly. The U.S. currency was up by about a quarter point against the similarly safe Swiss franc.

Let’s see how the Brexit shakes out. Maybe it will inspire Europe, which then can take heart that it is doing something right, to take charge of growing its economy and let the U.S. relax a bit on the economic leadership front.

On the various news items, the VIX volatility index is down 10.50% today, indicating an easing of anxiety among traders and investors.

The CME FedWatch rate hike implied probability indicator held more or less steady for the next FOMC meeting in late July.

Wishing you as always, good trading,