Direxion Shares Exchange Traded Fund Trust and Gold will end this week on a highly bullish note. The simple reason is that UK has voted to leave the European Union. Gold recorded a renewal in its safe-haven status after the historic “Brexit” vote that happened on Thursday. Britain held a referendum on Thursday to vote on whether it should remain in the EU or not. The results shows that Brexit camp had the highest number of votes.
The Brexit vote is one of the major factors affecting the price of the yellow metal in the last couple of weeks. Many people believe that a Brexit will provide the bullion with tailwinds. Of course, a vote to remain in the EU will dampen its bullish prospects. On Monday, bookmakers noted that the odds that Britain will remain in the EU outpaced the odds of a Brexit. However, a couple of analysts noted that gold would still shine irrespective of how Britain votes at the polls.
Gold to soar as Britain leaves the EU
News reports on the Brexit vote showed that Britons shocked the world by voting to leave the EU contrary the market odds. In an historic vote, 52% of Britons chose to “leave” the EU to beat the 48% voters who wanted to remain in the EU. Now, the UK will embark on a two-year negotiation with the EU to determine the terms of an exit from a 43-year relationship.
Nigel Farage, one of the vocal proponents of the Brexit camp noted that “The dawn is breaking on an independent United Kingdom. Let June 23 go down in our history as our independence day“. Hence, investors in bullion and Direxion Shares Exchange Traded Fund Trust should expect an impressive uptrend once the markets open for trading today. The uptrend today is a function of a potential increase in demand for the yellow metal.
Firstly, Britain and the entire Euro zone will be plunged into a new season of uncertainty following the historic vote. Secondly, we can expect to see more member nations hold referendums about leaving the EU. Thirdly, the British Pound might suffer volatility when financial firms start moving in and out of the UK. In response, Britons will buy gold to maintain the value of their wealth.
Where is gold headed after the Brexit?
Without much ado, gold is headed for the skies. As soon as the news of the Brexit broke, spot gold jumped an incredible 8.1% to $1,358.54 an ounce to mark the highest price since March 2014. The yellow metal maintained the gains and it is trading $1,328.90 an ounce in London this morning as at 5:09AM. Interestingly, Direxion Shares Exchange Traded Fund Trust is already up a massive 23.73% to $118 in premarket trading today.
Analysts are expecting U.S equities to open significantly lower today as investors start to consider the effects of a Brexit on their portfolios. The words of Mark To, head of research at Wing Fung Financial Group in Honk Kong are starting to come to fruition. On Monday, he said “The best case scenario for gold in the coming few days is that it stabilizes at the current level just ahead of the $1,300 resistance level. By the end of June, I think $1,300-$1,400 should be relatively a reasonable price for gold.”