The price of gold moved down on Thursday as the dollar strengthened, in the wake of Donald Tusk’s acceptance of Britain’s withdrawal from the European Union. But the question remains – what will happen to gold as Brexit negotiations begin?
Moves by the central banks have dominated the currency markets of late, and in the final part of 2016 gold sharply fell to $1,122 as it began to expect a rate rise from the US Federal Reserve.
Gold saw a similar situation at the beginning of March, when gold lost 5 percent, decreasing from $1,264 to 1,195 waiting for the rate hike eventually announced by the Fed on the 15th of March. Despite this raise, the markets interpreted Yellen speech as almost dovish; the US dollar went down, while gold returned above $1,250. The relative weakness of gold, increased by the failure of President Trump in trying to cast Obamacare into the annuls of history, pushed investors further on gold.
Carlo Alberto De Casa, chief analyst at ActivTrades, commented: “So far the trend still appears positive, with the first resistance placed at $1,261 on Monday, followed by $1,1264, at the peak of the end February.
“If gold prices jump above this area we could expect further rebounds, with the next target at $1,280 and, further, at $1,300-1,305, the area which started the sell-off recorded in the last few months of 2016.”
“Vice versa, the first significant support area is placed at $1,240, followed by $1,225. We could see a new bearish signal only if prices could return below $1,200/1,195, a key support area for the yellow metal.”
The dollar is still relatively volatile in the wake of Trump’s surprise presidency win. After a strong post-election run the Dollar changed direction at year’s end and has been on a downward trajectory since; this can be expected to continue as Trump focuses on policies that are ‘popular’, but likely to be inflationary.
Given the instability in the markets, across both the US and Europe as France and Germany prepare to go to the polls, gold is likely to remain a safe haven for investors.