Gold should rally towards $1400 as the US Fed is unlikely to hike this year especially after the Brexit votes. Copper is likely to underperform on rising supply and the slowdown in China.

We foresee according to Chinese state information centre researchers, fiscal year 2016 inflation is projected to come in at 2.0 pct YoY, while PPI is seen falling by 2.7 pct YoY. Similarly, retail sales growth is expected to slow down in second half of 2016 due to downward economic pressure.

We expect gold to reach $1,400/oz before year-end. The heightened market uncertainty due to Brexit will prompt investors to seek safe-haven assets, benefiting gold and the rest of the precious metals.

In general, our impression from the reporting season so far is one of higher production (copper) and lower costs.

While, arguably, some of this uncertainty has already been priced in, there is likely much more to come.

Brexit would spark significant physical purchases of gold not just in the UK but also from the much larger European market, particularly Germany, which accounts for over half of the total gold retail investment demand in Europe, according to GFMS figures.

Furthermore, the Brexit vote is likely to cause the Fed not to hike this year which would be beneficial for gold.

We consider the recent copper rally to be premature given that copper mining output is increasing which is likely to result in a supply surplus this year.

Furthermore, the demand outlook for copper is muted partly because of slowing infrastructure spending growth in China. We forecast the LME copper price to trade down to about $4300 before year-end.

Since above fundamental factors lingering around various investment avenues, investors perceive bullion investments as safe haven avenue, we recommend longs in gold spot vs short 3-month LME copper Target is for gold to outperform by about 10%.