A few reasons for gold’s possible scaling up were pointed out, last week by JPMorgan Natural Resources Fund manager Neil Gregson.
During times of unrest, investors often run to safe haven assets such as gold and silver and the EU (European Union) referendum was beneficial to gold, sparking unrest in markets across the globe.
One factor is the fall in the value of the British pound. It could likely spike inflation numbers in the United Kingdom, because of this, once again; the demand for gold could be aided.
Gold and the US Dollar have a close-knit relationship. When we see a rise in the dollar this often causes weakness in gold, while the opposite, a fall in the dollar helps gold to rise. Gold is a dollar-denominated asset, and it gets cheaper for investors from other countries to buy the dollar when it’s falling. We then see investment in gold become cheaper.
In the mining companies the majority reversed their 2015 losses during the first few months of 2016, posting substantial gains. The correlation between mining stocks and precious metals remains high. On average, miners follow gold’s price direction almost 50% of the time.
Most mining companies have seen losses over the past few days due to the reduced positive sentiment for gold as tremors over the Brexit vote result are now subsiding.