Brexit: What is the correlation with the gold price?

Brexit: What is the correlation with the gold price?

At the end of March the UK officially carried out the divorce process from the European Union by carrying out Article 50 of the Lisbon Treaty. What is the impact on the movement of gold prices ?

On March 20, 2017, the British Prime Minister, Theresa May, carried out Article 50 of the Lisbon Treaty . Thus, that means the UK notifies the European Council that they will formally resign from EU membership so that they can negotiate the resignation. In other words, the UK will officially start the “divorce” process which can take two years.

Although this event could be said to be a historical event, it did not make the gold price move significantly, at least not when it was taken. Maybe it was because the move had been anticipated by the market, because Theresa May had previously announced that she would run Article 50 in March 2017.

But that does not mean that Brexit will not have any impact on the precious metals market. Of course it will depend on how the negotiation process will work. If the negotiation starts in the wrong way, or turns out to be more difficult than expected, it is very likely that demand for gold – as a safe-haven asset – will increase. Conversely, if the negotiators can actually negotiate with “relax” just without arguments or meaningful pressure, then the gold price will probably weaken.

But, however, gold investors are advised to remain calm, because the worst scenario for Brexit has not yet happened and the price of gold has not soared. This divorce process will occur in a very gradual manner, thereby reducing its impact on the market.

One thing is for sure, traveling to less than two years ahead will certainly be very interesting and many things might happen along the way.Scotland has even voiced to carry out the second referendum for the independence of William Wallace’s homeland. Not to mention Gibraltar, a small piece of British rule in the southern tip of Spain, whose future will also be a hot argument.

Oh yes, don’t forget Northern Ireland, also the fate of British citizens living on the European continent, immigrants working in the UK, new trade agreements, and so on. Every issue has the potential to cause possible uncertainty – again: maybe – it will give positive sentiment for gold. In other words, any uncertainty that arises will very likely be followed by a strengthening of the price of gold.

About Author: Muh Ikhsan

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