Gold inter-markets: rebounds supported by cautious mood ahead of key event risks

On Tuesday, Gold tumbled for second straight day and extended its slide on Wednesday to a fresh two-week low level of $1327 before staging a minor recovery to currently trade in positive territory around $1342. 

Easing political uncertainty in the UK and a upbeat global risk sentiment have been the key factors driving investors away from perceived safe-haven assets - like gold, treasuries and Japanese Yen, and boosting demand for riskier assets - like equities. Improvement in investor risk appetite is portrayed by a sudden turnaround in the Volatility Index (VIX), which has been continuously drifting lower since following a sudden spike in the aftermath of last month's historic Brexit referendum. 

Falling VIX has acted as a supportive pillar for a strong bullish momentum witnessed in the broader US equity index - S&P 500. Adding to this, although tepid but recovery in US long-term treasury yields (30-years) in the past couple of days triggered a sharp sell-off in gold prices and was accompanied by a sharp up-surge in the USD/JPY pair.

Wednesday's recovery in gold prices has been led by investor cautious mood ahead of the key event risks, BOE monetary policy decision on Thursday and Chinese GDP data on Friday. A minor down-tick in the USD/JPY pair and US treasury yields are pointing towards the prevailing investor nervousness. 

Cautious mood might trigger a fresh wave of global risk aversion and spurt VIX, leading to a corrective move in S&P 500, and eventually benefitting traditional safe-haven assets, including gold.