Gold set to rebound
Published on 10.07.2018 17:36

The political uncertainty currently surrounding the UK as well as US President Donald Trump’s upcoming visit to the country may be just what Gold needs to break out of its recent trading range.

Brexit Secretary David Davis was the first to resign from May’s cabinet over differences about Brexit negotiations which was followed by the resignation of foreign Secretary Boris Johnson who believes that Prime Minister May is not adhering to the will of the British people by demanding a soft Brexit which would keep the UK tied to the EU in many aspects.

Some say the recent events may lead to a leadership challenge this week with Boris Johnson’s name being passed around as one of the potential candidates.

The danger of a leadership challenge is it may be a stepping stone to a general election, which mat even, remove the Tories from power allowing the labor government to take over.

Gold would be a big beneficiary of such a scenario as investors seek out safe havens because of the potential financial turmoil a snap election would cause.

Another factor that may help the gold price recover is rumours that the US Federal Reserve may not lift interest rates as high as the market thought earlier in the year.

These expectations have had a dramatic effect on the gold price as investors snapped up US dollars in anticipation of higher rates so if the Fed does indeed scale back on their rate hike ambitions, gold should receive a further boost.

“It is likely that many gold market participants may be walking back their somewhat lofty Fed rate hike expectations, which along with angst in the emerging economies and trade concerns, should provide support to their currencies, which in our opinion have been instrumental in placing a pall on gold,” said TD Securities head of global strategy Bart Melek.

“The yellow metal is projected to move past $1,270 during the summer months. Indeed, we would not be surprised to see the yellow metal move into $1,300 in the final three months of 2018,” he added.


Andrew Masters

Analyst

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