Will Brexit Affect the Gold Price?

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Macroeconomic events will often trigger consequences for various financial markets. The Brexit will have an impact on gold and other precious metals, albeit not in ways most people would expect. There are some things to potentially look forward to, however.

The Brexit Kerfuffle remains

Ever since the Britons voted for leaving the European Union, there has been a lot of doubt and uncertainty. Four years later, the deal still hasn’t been finalized, and the concerns have grown even bigger. Leaving the European Union is a major development that will trigger a financial shock of sorts. One such shock pushed the pound and equities to very low levels already. While the market recovered, there is no indication that this will not happen again.

Fast forward to today, and there are still many questions. The EU and the UK seemingly cannot agree on a favorable trade deal. The European Union wants to enforce EU rules if Britons want to trade in this region. At the same time, the UK wants free access to the market without playing by specific rules. It is evident there is no common ground between the two, and that both parties will need to come closer together in one way or another. Until that happens, there will be further market instability.

As financial instability ensues, investors are often driven to alternative markets. This can be beneficial to gold, silver, and other precious metals accordingly, Gold could do with a boost, after its most recent market setback. At the same time, the leading precious metal has not given up that much ground compared to stocks and other assets.  The final few months of 2020 will be interesting either way.

Global Repercussions Seem Unavoidable

One may want to believe Brexit only affects the UK and European Union. That is far from the case, as these events have global repercussions. Brexit can pave the way for breaking up the entire European Union. At the same time, the EU has to keep its foot down without risking to lose a key trading market. It is a very tough balancing act, all things considered, and one that will remain in place for a while to come.

Gold is still widely considered to be an indicator of wealth. In recent years, it has become a traditional safe haven asset. Brexit is a catalyst driving demand for safe haven assets, and the longer this kerfuffle lasts, the stronger that demand will become. Ultimately, it will create a global tidal wave that will move the gold market either up or down.

Considering how the Brexit negotiations have been going on for a time now, it is unlikely that anything changes in the near term. More uncertainty is likely to fuel market demand for gold and other precious metals. Even if an agreement would be found all of a sudden, it will likely trigger a higher bullion price.

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