The gold price has remained above the $1300 mark in today’s trading session after breaking this important level yesterday and today’s outcome regarding Brexit negotiations may dictate whether the precious metal can remain at or above this price.
Gold has failed to make any significant gains over the last few weeks as investors await the outcome of Brexit negotiations and that may finally come to a head today at the EU summit that will take place early this evening.
During the Summit, the UK will ask for a further extension regarding Brexit in order to buy time to forge a deal among waring MP’s and depending on the decision of the EU which requires all 27 states to agree, the pound is likely to see extreme volatility.
"Now, we are in calm waters. We have only seen people standing on the sidelines. It is like a tranquil swimming pool and this will remain until we know what is happening with Brexit,” Said Goldex CEO and founder Sylvia Carrasco. “Up until Brexit is settled, the economy will continue to be in uncharted territory .We have investors who are waiting to open gold accounts until they know what is happening with Brexit. This is investors who are keen on gold, but are waiting on the sidelines,” she said. “Uncertainty is what is happening in gold at the moment.” She added.
Also helping the gold price is speculation that the US Federal Reserve may be preparing the market for a rate cut later in the year which is a complete about turn from a few months ago where many analysts were sure that more rate hikes were on the way. These rumors have put pressure on the US dollar and a weaker greenback is always good news for gold. The Chinese government has also reportedly been stockpiling a significant amount of gold which provided added support.
“There’s a little bit of easing risk appetite, the U.S. dollar is weak and we saw Chinese central bank’s acquisition of gold for a fourth month. A combination of all these factors have moved gold into the $1,300s,” said Bart Melek, head of commodity strategies at TD Securities in Toronto.