Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

No for Brexit Deal, Yes for May. And What for Gold?

Commodities / Gold & Silver 2019 Jan 17, 2019 - 03:45 PM GMT

By: Arkadiusz_Sieron

Commodities

71 days. That’s all that separates us from the Brexit deadline. And the UK has still no clear path forward exiting the EU. Does gold have one?

Today's analysis features possible scenarios for the UK and for gold along with their likelihood. In the current political situation, it's a must-read.

Parliament Rejects May’s Brexit Deal

On Tuesday, the UK Parliament voted on Theresa May’s Brexit deal for leaving the EU. As expected, the MPs rejected her proposition. What was really surprising was the scale of defeat. The parliament voted 432-202 against May’s divorce deal, marking the worst defeat in modern British history.


The reason for that humiliating loss was the split within the Conservative Party. May’s plan was a compromise attempting to soften the divorce with the EU. But, as it often happens with compromises, it did not satisfy anyone. Some Tories wanted a more decisive split with the EU, while others wanted to remain closer or not leave at all. Both groups joined forces, crushing the deal.

What Next?

Now, the key question is what will happen next. It’s hard to say, as – we agree here with May’s post-vote statement – “it is clear that the House does not support this deal, but tonight’s vote tells us nothing about what it does support.”

Generally speaking, there are several options. The first scenario is that May will quickly deliver a new and better deal, which will be accepted by the Parliament. This plan B will pave way for a formal and an orderly exit. Given that the EU is not eager to make concessions that would please Tories, it’s not a likely scenario.

The second option is that there is no deal at all. It means that by March 29th, 2019, the UK will crash out of the EU without a formal plan in place. The consequences could be substantial, as the disorderly Brexit would disrupt supply chains and bring chaos, at least initially. Trade with the EU would switch then to World Trade Organization rules, hitting the economy. Given that the country will face unprecedented uncertainty in that scenario, gold should shine.

The third option is that there will be a second referendum on Brexit, as many British people call for it. We agree that it could undermine the idea of a referendum, but it would not be unprecedented course of action, actually. As the Remainers would have higher chances during the second vote, gold bulls should not like that scenario. We have suggested a long time ago that the UK will never exit the EU, so we would not be very surprised. However, as Theresa May – who is against the idea of the second referendum – won the no-confidence vote yesterday, that scenario is also unlikely, at least for now.

The last option we would like to analyze is the most probable one in my view. As May won the no-confidence vote, she will try to delay Article 50 and come up with a new deal (or a way to not deliver Brexit), perhaps similar to the Norwegian model, which is allegedly gaining momentum among the Conservatives. It would be the least damaging form of Brexit, as it would allow the UK to retain the full access to the single market. But the country would have much less say in shaping its rules than it does now as an EU member. However, it’s not an easy path, as the EU would agree to extend the deadline in exchange for further concessions. And May would probably have to cooperate with the Labor Party as well to gain the support for plan B.

Implications for Gold

What does it all mean for the gold market? Well, it seems that markets have already priced in the worst. Why do we think so? Just look at the chart below, which shows that USD/GBP exchange rate.

Chart 1: USD/GBP exchange rate


As one can see, sterling lost before the vote, but rallied after it, on expectations that the defeat would force the British government to buy more time and continue their negotiations. In other words, investors believe that on March 29th, the UK will still remain within the EU. As the US dollar weakened against the pound sterling, gold prices inched up yesterday, as one can see in the chart below.

Chart 2: Gold prices from January 14 to January 16, 2019.


However, gold failed to jump above $1,300. It’s a rather bearish signal given the fact that the United Kingdom is now in the deepest political crisis in half a century, while the US government is partially closed for almost a month. It suggests that gold needs even more serious trigger to rally.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron

Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in