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On Wednesday (22/6), gold touched the lowest level in nearly 2 weeks, (10/6) at 1261.25 as the chances of Britain remaining within the European Union increased.
Gold, a traditional safe-haven asset, tends to benefit more in times of heightened risk aversion, when investors seek a safe place to park their cash. As a result, the yellow metal hit its peak since August 2014 last Thursday (16/6) as investors attempted to cling to the safe haven after a poll earlier this month reported a 7-point lead for those in favor of leaving.
Yet, all the tables turned on Monday (20/6), as an ORB International telephone poll conducted for The Daily Telegraph indicated that the “Remain” campaign with 53% of the vote was ahead, in contrast to 46% for the “Leave” campaign. Additionally, the Betfair – the world’s largest “event odds” exchange has also indicated that the “Remain” group has been gaining traction, with the implied probability of the remain camp prevailing at the referendum, up to 78% on Monday, from 60-67% on Friday.
In the short-term, the gold price would be significantly affected by the outcome of the upcoming referendum in the U.K. However, when it comes to the long-term, the demand for gold as a safe haven could still rise, because of the uncertainty over the US economic outlook and negative interest rates from central banks around the world are still bothering investors. Moreover, global markets are vulnerable and easily swayed by risk sentiment, as many economies are facing sluggish growth. There is a high chance for gold prices to move up for some time amid the global market turmoil.
Markets are paying close attention to the U.K Referendum which will take place tomorrow.
Fig. GOLD D1 Technical Chart
On the daily chart, the precious metal is moving downwards after hitting the resistance at 1315.84, formed on June 16, 2016. On stochastic chart, the %K line (blue line) has slumped into the oversold zone, and is currently at 14.2739 – far ahead the %D line (red line) at 28.6318. This suggests strong selling power. Bullish momentum is weakening as ADX index has slid to 41.2067, along with the shrinking difference between DI+ and DI-. The market is anticipated to move down in the short term before it finds its feet and tries to consolidate.
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