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James Hyerczyk
Comex Gold

Gold futures have done an about face from weakness earlier in the week and are now trading higher as Brexit hung in the balance, with the British Parliament still divided on how, when or even if to engineer Britain’s departure from the European Union.

The rise in gold along with a stronger Japanese Yen, a decline in equities and higher U.S. Treasury prices underscored investors’ aversion to taking on big risks as the drama over Britain’s departure from the EU grows increasingly complex by the day.

At 09:59 GMT, December Comex gold is trading $1496.30, up $8.80 or +0.59%.

Bullish Factors

Two bullish factors are supporting prices today:  Brexit and the International Monetary Fund’s (IMF) forecast calling for slower growth in Asia.

With no major economic data scheduled today and little fresh news regarding U.S.-China trade relations, gold traders are almost being forced to focus on Brexit, and whether Britain will hold a general election to break the impasse in parliament.

At issue is whether the EU can reach a decision to extend Britain’s October 31 deadline for its departure from the bloc, although there is hope Britain can avoid the worst-case scenario of leaving the EU without any deal in place.

Economic growth across Asia is set to slow more than expected, according to the latest projections by the International Monetary Fund (IMF).

In its Regional Economic Outlook report released Wednesday, the IMF said growth in Asia could moderate to 5% in 2019, and 5.1% in 2020 – that’s 0.4% and 0.3% lower than its April projections.

Earlier this week, the IMF had projected the Chinese economy could grow at 5.8% next year – slower than the 6.1% forecast for 2019.

The IMF news is supportive for gold because it could mean central banks will be forced to implement additional stimulus measures including lowering rates and applying quantitative easing methods.


Bearish Factors

The U.S. and China are making progress in trade talks and that news is reducing demand for gold as a hedge against economic uncertainty.  Vice Foreign Minister Le Yucheng said on Tuesday that as long as both sides respected each other, no problem could not be resolved.

On Monday, White House economic adviser Larry Kudlow expressed optimism about ongoing U.S-China trade talks, and said tariffs scheduled for December could be withdrawn if negotiations continue to go well.

The talks, which are expected to continue with calls this week, were “looking pretty good,” Kudlow said in an interview on Fox Business Network.

Daily Forecast

Uncertainty over Brexit is supporting gold on Wednesday, but so far the move represents only a short-term, knee-jerk reaction to yesterday’s developments. The move is most likely being fueled by some light speculative buying by traders betting on the worst outcome and weak shorts lightening up on their bearish positions.

Gold prices could be limited by the strengthening U.S. Dollar, which has been mounting a recovery this week after a prolonged sell-off.

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