Funds flow into precious metals due to fear of Italian crisis, Long Gold?
Gold rallied over 1% yesterday, buoyed by safe-haven demand as Italy’s budget plan sets it on course for a potential clash with the European Union.
Precious metals such as gold and silver experienced a boost as fund managers scrambled to rebalance their asset mix towards safe-haven assets.
Last week, Italy’s newly elected populist government decided on a 2.4% deficit target for 2019, going against both the EU and the Italian finance minister’s target of between 1.6 and 2% of GDP.
Italy’s populist government has since offered some concessions to fend off EU pressures on its public finances and showed willingness to commit to reducing budget deficit targets in 2020 and 2021 while sticking to 2.5% in 2019.
There are fears that the Italian government could consider an exit from the eurozone which could lead to political mayhem for the EU.
The rally in gold could resume as long as the 1,200 price level holds.
Gold contracts jumped by 12 times the 100-day average volume yesterday:
