What a week!
October the 17th saw the announcement that the UK and EU had agreed terms on a new version of the Withdrawal Agreement. An upturn in confidence in the UK’s future saw Sterling rise against the Dollar and as a result the price of Gold in Sterling steadily dropped as low as £1142 per ounce as of the early hours of this morning 22nd October.
But, will the deal actually happen? Prime Minister Boris Johnson and his Cabinet Ministers remain adamant in supporting a Brexit October deadline but a substantial section of Parliament remains focussed on delaying or even halting the Brexit process.
The Government’s attempt to put the deal to Parliament during a rare Saturday sitting of the Commons resulted in acrimonious stalemate as MP’s decided that a vote on the deal should be postponed until the Withdrawal Agreement Bill, the legislation required to transfer the terms of the newly agreed deal into UK law, was approved by Parliament. This delay triggered the so called Benn Act and compelled the Prime Minister to make a written request to the EU for a further 3 month delay to Brexit. Boris Johnson’s response was to send an unsigned copy of the required letter together with an additional, signed letter stating his belief that an extension was unnecessary.
That brings us up to date as of Tuesday 22nd October. The Government is today asking MP’s to approve the Withdrawal Agreement Bill and there are signs that there is enough support from independents and Labour MP’s from ‘Leave’ constituencies to enable a rare Government victory. However, an anticipated subsequent vote on enabling an express timetable to rapidly push the legislation through in a matter of a few days is likely to result in defeat for the Government and further delay. Proposed amendments to the Bill from opposition parties are likely to cause further delays and could even produce proposals that the EU would not accept.
So, despite the initial excitement that we may, finally, be progressing towards Brexit October 31st will not be the day of departure. The reality is that as the situation changes then so too do the opportunities for the opposition to employ different ways to frustrate the Government.
Where do we go from here?
If only we had the answer! Whilst Boris Johnson has set the target as Brexit October 31st, Do or Die, it is looking increasingly unlikely that he can achieve this with a Minority Government. Opposition parties have previously promised a General Election once the threat of crashing out of the EU on 31st October has been countered. It may well be that this is the only way of putting an end to the inability of our current Parliament to agree on almost anything, particularly on Brexit. Both sides of the argument cannot prevail and a newly elected Parliament with a fresh mandate from constituents may provide the answer, whatever that answer may be!
In such turbulent times it is very easy to focus attention on what is happening at home and to lose sight of a broader, global picture. The twists and turns in the Syrian conflict now involving NATO member Turkey and Russia; the ongoing trade disputes between the USA and China; warnings that growth in China may be slowing at an alarming rate and confirmation of weaker trade in Japan and South Korea are all exerting stresses on the Global Economy.
How will the Precious Metals Markets respond in the near future?
We cannot forecast price movements but we can pay attention to a number of indicators. Gold has always been viewed as a safe haven in times of political and economic upheaval and we do seem to be living with more than our fair share of those at the moment.
Another point worthy of note is that Gold prices have reached all-time highs in respect of local currencies in countries as far apart as the UK, Japan, Australia and Canada. This has led to suggestions within those countries that maybe Gold has topped out and is not a sound investment. What needs to be remembered is that the Global price of Gold is set in USD and the Gold price in USD is currently standing at less than 80% of the 2011 all-time high. There is a great deal of potential for Gold to rise in USD, a fact that can be obscured if we focus too much on apparently high prices dictated by local issues and currency exchange rates.
As the year progresses and evenings begin to draw in we all tend to look closer to home in all things but in the case of precious metals, a Global outlook can be much more enlightening.
And in keeping with that thought I would like to take the opportunity to wish all of our customers a Happy Diwali for 2019.
