On June 23rd, Britain will vote on a referendum to remain or leave the European Union (EU). The referendum is known as Brexit. If Britain votes to leave the EU, gold has potential to jump about $120 in one or two days.
It is understandable that the first reaction of many investors is to buy gold, but should you buy gold for the short-term for Brexit based on rigorous analytical analysis and not just on an opinion? Let us examine the question in the following sections of this article.
Please click here for a large chart.
The annotated chart shows the logical Brexit target which is the first major resistance. The chart is of the ETF GLD. Equivalent target for spot gold is about $1400.
If the vote to exit is by a big margin or other favorable events occur at the same time, expect gold to shoot through $1400 like a hot knife through butter. The reason is that in futures, many short sellers will likely have their stops just above $1400. Hunt and destroy algorithms will take these stops out moving gold to $1410 to $1420 range. There is an upside of about $120 here.
When thinking of reward, astute investors also think of the risk at the same time. The risk in buying is that Britain may vote to remain in the EU. In such an event the chart shows the down side target for gold. This is the first major support. Equivalent in spot gold is about $1209. Gold may first fall to $1200 where buying will likely come in causing a small bounce to about $1209. There is a down side of about $80…Read more at Kitco.com
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