Gold Surges As Pound Pounded By Brexit, UK Leadership Uncertainty
(Kitco News)- Geopolitical uncertainty iscausing gold prices to spike in the United Kingdom as investors react to twohigh-profile resignations Monday.
Spot gold, priced in Britishpounds, has spiked higher and is holding on to gains as uncertainty ripplesthrough the country following the resignation of Brexit Minister David Davisand British Foreign Minister Boris Johnson.
Spot gold against the pound is up 0.90% on the day, last trading at GBP949.71 an ounce. In comparison, spot goldagainst the U.S. dollar is up a modest 0.35% on the day, last trading at$1,258.90 an ounce.
The pound is currently down 0.21% against the U.S. dollar, with currency markets' reactions relatively muted to the news.
“The markets don’t know what tomake of it all. For what it’s worth, our view is that sterling will be hitharder if the Conservatives can’t resolve their differences,” said JohnHiggins, chief markets economist at Capital Economics.
According to some marketanalysts, Johnson’s unexpected departure will put pressure on UK Prime MinisterTheresa May. Gold in pound terms could continue to push higher if the politicaluncertainty escalates.
The changes could lead some politicians to call for a non-confidence vote and trigger a leadershipelection within the Conservative Party, political pundits added.
“Any signs of a leadershipcontest in the Conservative party could further weigh on the pound,” said DavidMadding, market analyst at CMC Markets.
However, others have saidthat a leadership challenge might be unlikely because the country is headingvery quickly to its exit deadline early next year.
“At this point, it’s unclear ifthis battle will split the party or what this could mean for Brexitnegotiations,” said Colin Cieszynski, chief market strategist at SIA WealthManagement.
The resignations came afterPrime Minister May unveiled a softer Brexit proposal, which includes theadoption of a “common rule book” on standards for food and goods in return forachieving greater divergence on services and digital regulation.
Johnson, in particular, has notbeen shy to voice his displeasure with May’s proposal, comparing it to “polishinga turd.”
“SinceI cannot in all conscience champion these proposals, I have sadly concludedthat I must go,” Johnson said in his resignation letter.
In other harsh words about the proposal, he added: "What is even more disturbing is thatthis is our opening bid. It is as though we are sending our vanguard intobattle with the white flags fluttering above them."
By Neils ChristensenFor Kitco News
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