Citi Research would look for gold strength in the event the U.K. votes to leave the European Union even if such an outcome in the referendum also leads to strength in the US dollar.
In other words, the bank would look for gold to break away from its tendency of moving inversely to the greenback. "Why might a Brexit vote benefit gold even if the USD rallies in knee-jerk fashion?" Citi asked rhetorically.
"A Brexit outcome could mean no U.S. Fed rate hikes this year. Recent Fed meeting minutes and Chair (Janet) Yellen's presser last Wednesday confirmed market speculation that uncertainty around the EU referendum was indeed factored into the Fed's decision for a hike pass. The potential contagion impacts of the U.K. leaving the EU might cause the Fed to pause for longer, in our view, which should be bullish for gold."
Reference: Scrapregister
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