Gold/Equities Inverse Play off as Brexit Triggers Highs Above $1,300

By Barani Krishnan – Think not how much higher gold can go from $1,300 on Brexit.

Think instead that the gold down/equities up-trade as being over for now. Positive fundamentals for both now mean the two can rise simultaneously, as opposed to the past, when prices of the yellow metal typically fell when equities rallied.

This new order was evident on Wednesday as bulls had their day on both Comex gold and Wall Street. The sliding dollar, however, meant the gold/dollar inverse correlation remains, possibly the only of its kind that should matter at this point to precious metals traders.

Gold futures for April delivery were up $10.95, or 0.8%, at $1,309.05 per ounce on the Comex division of the New York Mercantile Exchange by 2:08 PM ET (18:08 GMT). It hit a near two-week peak of $1,309.60 after settling at $1,309.30, up $11.20.

Spot gold, reflective of trades in physical bullion, rose by $7.37, or 0.6%, to $1,308.96 by 2:08 PM ET after a session high at $1,309.46.

On Wall Street, the S&P 500 index rose almost 1%, as February producer prices indicated benign inflation that strengthened the Federal Reserve’s patient stance on future rate hikes.

The dollar index, which measures the greenback against a basket of six currencies, fell 0.2% to 96.69, retreating further from last week’s three-month highs at 97.67.

“The gold/equities inverse correlation is off for now,” said Eli Tesfaye, senior market strategist for precious metals at RJO Futures in Chicago.

“It’s one less thing for gold longs to worry about”, especially with the Brexit drama powering gold to seek newer heights in the $1,300 territory, Tesfaye added.

British lawmakers were set to vote on Wednesday against the threat of a no-deal exit from the European Union on March 29 after a second defeat for Prime Minister Theresa May’s divorce treaty left Britain heading into the unknown.

Tesfaye expects gold’s immediate target to be $1,330, and $1,350 thereafter, as “(u)nless we go below $1,280, the trend is up.”

Walter Pehowich, executive vice president at Dillon Gage Metals in Addison, Texas, agreed, saying gold’s fundamental strength has been heightened by Wednesday’s settlement above the key $1,304 resistance on COMEX.

“For the price of gold to continue to advance, we needed to settle today above that level,” said Pehowich. “Otherwise, this rally will be considered just a short-covering rally with no support.”

But analyst Fawad Razaqzada says the dollar could rally against the pound after Wednesday’s Brexit vote, potentially taking away some of gold’s luster..

“The potential delay of Brexit is what is helping to hold up the pound, but by the same token, the uncertainty is limiting its upside potential,” Razaqzada said.

Palladium prices rose for a third-straight day, reaffirming its standing as the world’s costliest metal.

The spot price of palladium rose by $11.80, or 0.8%, to 1,549.55 per ounce by 2:08 PM.

Trades in other Comex metals as of 2:08 PM ET (18:08 GMT):

Palladium futures up $21.50, or 1.4%, at $1,511.50 per ounce.

Platinum futures up $12.40, or 1.5%, at $844.30 per ounce.

Silver futures up 5 cents, or 0.4%, at $15.47 per ounce.

Copper futures flat at $2.93 per pound.