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Precious Metals Down As Brexit Deal Agreed

Author: Ian Davis - Bullion Manager

Published: 8 Dec 2017

Last Updated: 22 Aug 2019

As Theresa May strikes a deal with the EU and the first step of the Brexit negotiations are agreed. We take a look at how this has effected the live prices of gold and silver.

Precious Metal Prices Dip As Brexit Deal Is Agreed

It was touch and go as to whether Theresa May would be able to get a deal agreed with the European Commission. Members of her own cabinet have been signalling discontent and the Remainers from all parties were vocal about how they would or wouldn't handle the negotiations.

Yesterday, it was agreed that 'significant progress' had been made over the issue of the Irish Border and a 'divorce' settlement to the EU. This heralds the beginning of the next step of negotiations where a framework for a partnership between the UK and the EU can be built.  

Sterling strengthened slightly as the news filtered through. The pound was up approx 0.3% against the US dollar and up 0.4% against the Euro.

We have seen the sterling prices of gold drop from a high of £954.11 to a current live price of £925.66. An overall change of £-19.34 (-2.05%) over the week. This is almost a 12 month low; the last time we saw gold at this price was 27 December 2016. 

View Live Gold Price Here 

Although silver dropped from a high of £12.25 to a current price of £11.73, the overall change of £-0.4155 (-3.42%) has been significantly higher. The last time we saw silver as low as this was the day before the EU Referendum on 22 June 2016. 

View Live Silver Price Here

Don't Panic, Keep Calm – and Buy Bullion

It is not unusual for investors to get a little twitchy when the gold and silver prices react like this. Investors who are looking at buying bullion often hesitate as they wonder when will be the best time to buy, whilst investors who have bought recently start worrying whether gold will drop even more. Strangely enough, nobody seems to worry if gold might surge through the roof.  

 

Our Director, Lawrence, likes to use the train analogy – think of the sterling gold as as a train (for ease, let's call this Train Sterling) at a station, you're sitting there when another train pulls up on the track next to you (let's call this Train US$). Now, if Train US$ starts moving, you might think that your train (Train Sterling) is moving too, but in a different direction. However, it's only when you stick your head out of the window that you can see the ground isn't moving and it is simply an optical illusion. We did point out that you could get your head chopped off but he didn't think this was relevant. 

You may find it easier to look at the table below showing the live gold price in all three currencies today. You can see that the sterling gold price has been far more reactive over the last 24 hours than the US$ gold price or the Euro € gold price. 

08.12.2017 12:30 GBP £ US $ Euro €
Live Exchange Rate   1.3428 1.1441
Live Gold Price 928.44 1,248 1,063
Today's High 939.74 1,256 1,066
Today's Low 923.34 1,248 1,056
Today's Change £-11.70 (-1.18%) $-6.85 (0.55%) €2.750 (-0.26%)

Brexit - A Golden Future Ahead? Or A Deep Bottomless Chasm?

So, back to Brexit. The idealism of twenty eight countries uniting together is fantastic in principle. However, there has been a great deal of naivety. Who can truly overlook the variations of the temperaments of the different countries? Who could honestly expect the rule-abiding Germans to respect the way the passionate Greeks or Italians run their countries? One wonders whether if the European Union should have been run more like a global business than a political alliance. With the corporate rules and regulations that are in place to ensure that financial fudging is questioned, accounted for unlike the continued for financial irregularities of the EU.

The EU does not want Britain to walk away with a deal that is too lenient as it fears the union cannot withstand the seismic shift that could be triggered with other countries looking for a similar Get Out Of Jail card. Catalan, Scotland and Flemish nationalists continue to be a thorny issue within EU member states as they strive towards their own independence. However, Britain needs to be allowed to leave the club without a severe thrashing financially and psychologically. There is a limit to how far Britain will bend before it snaps back with the determination of the British bull dog.  

We think May’s team have made the correct steps in negotiations, at least initially. To have strode in with an attitude of My Way or the High Way, would have been too restrictive for the EU to digest. Both the EU and Britain still need to find common ground where outcomes can be reached whilst both parties save face. We’re not being pro-May, we’re simply agreeing in this instance with her conciliatory approach to attempt to find a path of resolution to Brexit.  

Whatever Theresa May and her team agree, they still need to get the deal passed through government. The agreement could still face defeat when May presents the EU Withdrawal Bill. She needs MPs from all sides to feel that the deal is in Britain's best interests. Clarification is needed and we have no doubt many amendments will be required which in turn will need to be negotiated again with the EU. 

The financial settlement is yet to be revealed and may increase, or hopefully decrease - who doesn't like to believe in a Christmas miracle?

A neutral think-tank is urgently needed to look at all outcomes, positive or negative, to make sure that whatever hurdles are encountered Britain has plans in place and can continue to prosper.

So What Does the Future Hold for Gold and Silver Investors? 

No-one is saying it is going to be easy and no doubt there will be many hurdles to overcome, but Brexit does not equal disaster for the United Kingdom. Britain wants to continue free trade with Europe as well as negotiating efficient trade deals with the rest of the world. If a successful plan is put in place there is no reason why Britain couldn't act as the go-between for Europe and the rest of the world.  

Precious metals have always been a favourite safe haven for investors, especially in times of uncertainty. It is easy for investors to buy gold and silver coins and bars in handy amounts at low premiums that can be used as a buffer against financial fall outs along the Brexit path of negotiations.

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