Gold Awaits UK Election Results, Holds Largely Steady
Gold is largely steady, as traders remain cautious and await for official results from the U.K. election, following a shocking exit poll that projected Prime Minister Theresa May's Conservative Party falling short of a majority.
The exit poll estimated that the Conservatives will have 314 seats in the 650-member parliament, while the opposition Labour Party would be not far behind with 266 seats, which would lead to a so-called "hung parliament" with no clear majority.
Spot gold on Kitco.com was trading above the previous session's lows at $1,278.60, at the time of publication, while August Comex gold was last seen at $1,282.50.
In reaction to the news, the pound first dropped about 2% against the dollar and the euro on the fear that uncertainty in the domestic politics could delay Brexit talks. Sterling was trading at $1.2719 at the time of publication, after reaching the low of $1.2705 - the weakest since April 18.
Analysts are saying that if the exit poll is correct, the pound will fall even further.
"If the exit poll projections are proved correct, it signals a period of uncertainty as some type of minority government or coalition is negotiated," analysts at BNP Paribas said in their FX Strategy note.
"We think GBP losses are likely to extend if the exit poll projections are proved correct. The market had almost entirely reduced GBP short exposure ahead of the election and the increased uncertainty will likely prompt FX investors to re-establish GBP shorts. We maintain our view that in a Labour-led coalition scenario GBPUSD could trade towards recent lows near 1.20," they added.
Some analysts have noted that renewed weakness in sterling could spur domestic gold demand, similar to what was seen after last year's Brexit referendum, which created historic volatility in the nation's current and in gold. While gold is weaker against the U.S. dollar, it is up significantly against sterling. Kitco gold currency charts show the yellow metal last traded at ?1,004.70 an ounce, up 1.42% on the day.
Prior to the election, May had a lead of 20 points in the opinion polls. The shocking turnaround led to some harsh statements by politicians.
Former finance minister George Osborne said on Friday that May now faces a "huge post-mortem" about the election campaign and questions regarding the direction of the Conservative Party.
"I think there will be a huge post-mortem about having the general election, about the manifesto... about the style of the campaign," Osborne told ITV. "And out of all of that, people will start to ask questions... about the future of the direction of the Conservative Party."
By Anna GolubovaFor Kitco News
Follow annagolubova
agolubova@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities,securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |