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Gold price boosted by hard Brexit fears

Jan 16, 2017

Prospect of leaving single market – plus doubts over Donald Trump effect in US - sees traders rush to 'safe haven'

Gold is being boosted this morning as concerns over a hard Brexit dominate the market commentary.

Reports indicate that Theresa May will tomorrow signal the UK is to quit the European single market when it leaves the EU. This has worried the markets, with traders concerned about the destabilising consequences for the UK, EU and, ultimately, the world's economies.

Consequently, a rush of so-called "safe-haven demand" triggered a wave of gold buying, Reuters reports, pushing the gold price up 0.8 per cent to $1,205 an ounce in Asian trading overnight.

DailyFX says prices are also being bolstered by the fact traders are now less convinced Donald Trump's presidency will result in stronger growth and inflation.

"This narrative dominated markets in the final two months of 2016 but seems to have lost its lustre in January as investors turn leery about taking bets on the basis of an economic platform that is almost entirely unknown," it says.

Reuters reports that "inflation, industrial production and housing data [will] dominate a holiday-shortened week in the United States" and are "expected to show the economy ended 2016 with strong momentum".

This will increase confidence that the US Federal Reserve will follow through on its forecast of three interest rate rises this year.

Gold doesn't offer an income yield and so struggle when rates are rising. Many experts believe that unless the economic trend reverses, gold's gains will be capped around or under $1,200 for the foreseeable future.

Prices have already dipped backed slightly in London this morning, falling to below $1,202 an ounce.

http://www.theweek.co.uk/gold-price/61682/gold-price-boosted-by-hard-brexit-fears