SMM News: after Aunt May announced her resignation, a fierce competition is quietly heating up in the UK, a number of candidates are ready, the fate of the pound will be in the hands of the final winner, a big shock is inevitable. Gold investors should fasten their seat belts in advance. The prospect of Brexit is becoming more chaotic, but still, gold has not been supported, and markets are waiting for a clear signal of Brexit.
A fierce battle is unfolding in Britain
After British Prime Minister Theresa May announced her resignation on Friday, the eyes of the market focused on the candidates for the new British prime minister, who will have a bearing on the future of the pound. At present, the biggest concern in the market is that the hardline Brexiters who accept the reality of Brexit without an agreement could take over as prime minister, when the pound could face a huge impact.
Johnson is clearly the most popular candidate to replace Aunt May as leader and prime minister of the Conservative Party, which may be a strong signal for many traders to sell pounds. Because he was described as a hardline supporter of Brexit, Johnson argued that Brexit must be "Brexit" on October 31st, even if it was "Brexit without an agreement".
However, market participants are unanimously expecting the election of hardliners who advocate Brexit without an agreement to put downward pressure on the pound. So if he is elected, whether or not he has always supported Brexit without an agreement, it could have an impact on the pound.
Robin Barr (Robin Bhar), head of metals research at Societe Generale, said it was puzzling that gold had not received effective support, but the outcome of an unagreed Brexit could be a trigger.
Afshin Nabavi, head of trading at MKS, expressed the same view. Nabavi said it was hard to say how the Brexit talks would affect gold prices in the near future because of the delay in the exit date until October 31, but leaving the EU without an agreement would be good for gold. He also said that while gold had not responded to recent political tensions, that did not mean it was no longer a safe haven.
Ryan McKay, commodities strategist at Dominique Securities, said Brexit was a bit complicated for gold because of currency valuations. Britain's unagreed Brexit will have a negative impact on the pound, which could also strengthen the dollar and drag down gold prices. But at the same time, he added, gold would be sought after if the uncertainty of the geographical situation damaged investors' market sentiment and economic growth expectations.
The ratio of gold to silver has reached a new high in 26 years, and it is expected that the trend of gold and silver will be higher.
Another indicator of pessimism about precious metals is falling silver positions and falling silver prices.
Because silver has not only a risk aversion property, but also an industrial property, with the recent signs of global manufacturing weakness becoming more obvious, the decline of silver is significantly greater than that of gold. Meanwhile, speculative long positions in Comex fell 4578 to 52557 in the week ended May 21. Meanwhile, short positions increased by 10656 contracts to 81988. Silver's net short position rose to 29431 contracts, more than double the previous week.
As a result, the ratio of gold to silver has continued to rise and has reached its highest level since 1993. In general, when the ratio of gold to silver soars, the precious metals market goes up. In response, German Commercial Bank analysts believe that the current situation is similar to November 2018, when silver appeared a large number of short covering.
Commodity analysts at Dow Securities also said that as the data began to deteriorate, continued moderation by central banks and potential growth concerns should prompt money managers to increase their allocation of gold.