Gold Dream Run Continues

Gold continues to build on to its post-Brexit bullish momentum and surged to a new 2-year high level of $1375 on Wednesday. The precious metal is benefiting from global flight to safety led by economic uncertainty surrounding last month’s UK vote to leave the European Union. Meanwhile, prospect of additional monetary stimulus from next week’s BOE meeting compounded the metal’s bullish traction.

On Wednesday, the yellow metal got an additional boost after minutes from the US Federal Reserve’s meeting on June 14-15 revealed that majority of policy-makers favored to keep interest-rate hike on hold despite of diverging opinion over the economic conditions. The minutes did point to a further rate-hike but didn’t hint over the timing of such an action.

The metal, however, retraced from higher levels as a slight improvement in risk appetite helped investors to nudge back into riskier assets. Despite of the commodity’s relentless rally of nearly 4%, bulls are unwilling to take a breather as the metal is now trading higher again, for seventh consecutive day amid cautious trade in global equity markets.

Meanwhile, according to the data compiled by Bloomberg, holding in gold-back exchange-traded funds rose and topped 2000 metric tons for the first time since July 2013 on worries about the possible economic fallout from last month’s historic UK-EU referendum and diming prospects of an eventual Fed rate-hike.

The ongoing momentum in the bullion runs the risk of a sudden turnaround in investor sentiment as an exceptionally strong monthly employment data from the US would resurface fears of an imminent Fed rate-hike, sooner rather than later, and produce a knee-jerk bullish momentum for the US Dollar. A stronger US Dollar hurts demand for dollar-denominated commodities – like gold. US labor market statistics are scheduled for release on Friday.

Technical outlook

From a technical perspective, the metal is currently trading just below 61.8% Fibonacci expansion level of Brexit-led sharp up-surge and subsequent retracement. Moreover, hourly RSI readings are pointing to near-term overbought conditions that warrant consolidation at current levels or a near-term corrective move.

However, a strong follow through buying interest has the potential to boost the commodity beyond this immediate resistance near $1370 level and open room for further near-term appreciating move towards $1400 psychological mark before eventually heading towards 100% Fibonacci expansion level resistance near $1410 level.

Conversely a corrective move below previous swing high of $1358 is likely to get extended towards $1342 intermediate support before the commodity drops further towards its next major support near $1325 level. A decisive break below $1325 support should drag the pair back towards post-Brexit lows support near $1305-1300 round figure mark.