Gold price set to push above $2000 as GBP falls
The price of gold has edged above resistance levels and could break above $2000 an ounce as the Sterling continues to weaken amid the economic fallout from the coronavirus pandemic and emergency Brexit talks.
- Gold price could break above psychological $2000 mark
- Weakening GBP/USD could support gold prices to trade higher
- Brexit could see investors further flock to safe-haven assets like gold
Gold prices continue to edge higher this week, with global currencies weakening and equities coming under renewed pressure as Covid-19 cases surge and investors grow increasingly worried about the prospect of a no-deal Brexit.
The price of gold is up more than $16 to trade at $1957 at the time of publication, with the precious metal capable of pushing above the psychological $2000 mark in the coming weeks as macroeconomic headwinds could see investors flock to safe-haven assets.
Brexit negotiations turn sour as deadline nears
There is considerable daylight between the UK and EU, with reports that the senior British legal advisers quit amid plans to scrap important aspects of the Brexit withdrawal agreement earlier this week.
According to news reports, the UK government is considering revoking its agreement to allow Northern Ireland to remain aligned to the EU customs union, which, if allowed to happen, would ensure a no-deal Brexit and plunge the British economy into turmoil.
The news plunge the pound to a six-month low against the euro and caused the FTSE 100’s recovery to run out of steam as investors become more risk-adverse amid the economic and political uncertainty.
Gold prices rise after AstraZeneca’s clinical trial delayed
The precious metal also got a boost from wider economic uncertainties stemming from the coronavirus pandemic after AstraZeneca’s vaccine trial was delayed due to a patient falling ill.
The news has weighed on UK stocks and prompted the World Health Organisation’s (WHO) chief scientist to label the event a ‘wake-up call’ for those attempting to combat the virus.
‘This is a wake-up call to recognise that there are ups and downs in clinical development and that we have to be prepared,’ Soumya Swaminathan told a virtual briefing from Geneva.
‘We do not have to be discouraged. These things happen.’
GBP/USD outlook points to further weakness
GBP/USD looks to be stabilizing around the psychologically important 1.30 level after its recent falls from a high above 1.34 at the start of this month, according to Martin Essex, analyst and editor at DailyFX, part of IG Group.
‘However, further weakness cannot be ruled out as the post Brexit relationship between the UK and the EU next year becomes an increasingly dominant theme for Sterling traders,’ Essex added.
GBP/USD: technical analysis
Despite a small bounce from yesterday’s lows, the GBP/USD pair continues in the downward move from the September peak, as Brexit tensions rise, according to Chris Beauchamp, chief market analyst at IG.
‘A resumption of the downward move that takes out $1.29 would clear the way for a move towards $1.277 and $1.25 over the near term,’ he said.
‘A recovery above $1.304, previous support, is probably contingent on some improvement in the current UK/EU impasse, but would signal that the uptrend of recent months has resumed.’
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