Bullion fell nearly 2 per cent on Tuesday in its biggest one-day loss in a month, touching its weakest since June 10 at $1,264.10 an ounce. That came after two opinion polls on Monday suggested it was increasingly likely Britain would choose to stay in the EU.
A vote on June 23 by Britain to leave the 28-member EU, dubbed “Brexit,” could tip Europe back into recession, putting more pressure on the global economy, thereby increasing the safe-haven appeal of bullion.
Spot gold was nearly flat at $1,268.49 an ounce at 0351 GMT. U.S. gold was down 0.1 per cent at $1,271.40 an ounce.
“With the Brexit vote now less than 48 hours away, participants seem to be positioning for a ‘Remain’ vote, however, if the ‘Leave’ does win there could be a ‘+3 figure’ gain in gold,” MKS Group trader James Gardiner said in a note, referring to a possible rise of at least $100.
Some analysts said it was too early to completely rule out a British exit from the European Union.
“We still remain nervous about the accuracy of British polls and so would not read too much into current ones showing the “Remain” camp being in the driver’s seat,” said INTL FCStone analyst Edward Meir in a note.
According to an opinion poll published on Tuesday, the campaign for Britain to stay in the EU has seen its lead over the rival “Out” camp cut to just one point.
“In case we see a ‘Leave’, we probably would see the upper end of our trading range which would be $1,350. But if we see a ‘Stay’ I think gold will see further uncertainty and may fall back towards the $1,200 level,” said Dominic Schnider of UBS Wealth Management in Hong Kong.
Spot gold may drop more to $1,252 per ounce, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.
Asian stocks edged up on Wednesday even as Federal Reserve Chair Janet Yellen’s cautious tone on future rate hikes added to a subdued mood in markets.
Yellen said Fed’s ability to raise interest rates this year may hinge on a rebound in hiring that would convince policymakers the U.S. economy is not faltering.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.39 per cent to 912.33 tonnes on Tuesday, the highest since September 2013.
Among other precious metals, silver dropped 0.2 percent to $17.23 per ounce and palladium edged 0.4 per cent lower to $548.20 per ounce. Platinum was nearly flat at $976.10 per ounce.