Gold Drops as Markets Anxiously Await British Election Results

Gold continues to lose ground, and is down 0.77% in the Thursday session. In North American trade, spot gold is trading at $1278.12 per ounce. The markets are keeping a close eye as FBI Director James Comey testifies before a Senate Committee. As well, voters in the UK are choosing a new parliament.

It’s Election Day in the UK, as an election campaign marred by deadly terrorist attacks has ended. It’s anyone’s guess what the voters will decide, so gold prices could swing in either direction once the ballots are counted. What started out as a walk-in-the-park for Theresa May’s Conservatives has turned into a fiercely fought campaign, as May’s comfortable lead in the polls has been seriously eroded by the rejuvenated Labour party, lead by Jeremy Corbyn. May called a snap election just six weeks ago, and Brexit was supposed to be the primary issue facing voters. However, terror attacks in Manchester and London have left voters fearful about their safety, and the fight against terror has become the number one issue in the campaign. It remains unclear what the political landscape will look like on Friday morning. May remained ahead in the opinion polls right up to the vote, but the key, unanswered question is will she garner enough seats to win a majority. If the voters deny the Conservatives a majority, May will only be able to govern at the grace of a hostile opposition. Such a scenario would seriously hinder May in upcoming Brexit negotiations with the European Union. If no party wins a majority, there is also the possibility of Labor and the Liberal Democrats joining forces to form a coalition government, leaving the Conservatives in opposition. This would create even more uncertainty around Brexit and jittery investors could send gold prices higher.

In Washington, former FBI director James Comey is currently testifying before the Senate Intelligence Committee. Comey started off by saying that he was not specifically asked by President Trump to close an investigation into Trump’s alleged ties with Moscow, so it is unlikely that his testimony will be the “smoking gun” that leads to charges of obstruction of justice against Trump. Still, Comey’s testimony could raise troubling questions about Trump’s conduct, and will only complicate matters for the beleaguered Trump administration. Investors are growing more skeptical that Trump, who seems to be spending most of his time in damage control mode, will be able to deliver on key promises, and may come to view the president as a lame duck, just months into his presidency. This kind of sentiment could be bullish for gold prices.

 

XAU/USD Fundamentals

Thursday (June 8)

  • All Day – British Parliamentary Elections
  • 8:30 US Unemployment Claims. Estimate 241K. Actual 245K
  • 10:00 US IBD/TIPP Economic Optimism. Estimate 51.6. Actual 51.3
  • 10:30 US Natural Gas Storage. Estimate 99B. Actual 106B

*All release times are EDT

*Key events are in bold

 

XAU/USD for Thursday, June 8, 2017

XAU/USD June 8 at 14:20  EST

Open: 1286.89 High: 1289.08 Low: 1272.38 Close: 1278.12

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1232 1260 1285 1307 1337 1367
  • XAU/USD was flat in the Asian session. The pair posted losses late in the European session and is flat in North American trade
  • 1285 is providing support
  • 1307 is the next resistance line
  • Current range: 1285 to 1307

Further levels in both directions:

  • Below: 1285, 1260, 1232, and 1199
  • Above: 1307, 1337  and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio has posted slight gains. Currently, long positions have a majority (56%), indicative of XAU/USD reversing directions and climbing to higher levels. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.