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FX FUNDAMENTAL ANALYSIS


massive change in the sterling gold price,” Strachan said. “With the way things are going, things could take a significant turn for the worst and the pound could markedly weaken in e x t r e m e l y u n c e r t a i n times.”


Tat said,


S t r a c h a n reminded gold investors that Britain is a small market compared to major Asian powerhouses , or the U.S. “While


the


U.K. is a major hub for trading precious metals, it is not a major source of either demand or mine production. Even large percentage changes in a bit of demand that comes from the U.K. does not make a difference for the supply-demand dynamics for the metal,” he said.


Tere are still too many unknowns with Brexit to try to predict what will happen, said Strachan, noting that aside from the extreme forex reaction, Brexit is unlikely to have a significant impact on gold. On


42 FX TRADER MAGAZINE April - June 2019


It could be a “sell the rumor, buy the fact” situation with the British pound


Phillip Streible. “You need a serious rally in the British pound [to trigger a gold rally]. If the pound goes up, then the U.S. dollar should go down and then gold futures should rally on dollar weakness,” Streible said. “You have to watch the pound. Te pound’s volatility has increased quite a bit. Te situation is becoming quite delicate over there.”


It could be “sell the rumor, buy


the other hand, a significant rally in the pound could also work in favor of gold, highlighted RJO Futures senior market strategist


the fact” situation with the British pound, noted Streible, explaining that the currency has already been selling off so much due to Brexit worries.


“Once


the deal is done, it will give the oppor t u n i t y for the pound to rally and the dollar to sell-off and gold will get a boost,” he said.


Brexit’s impact on the British pound is what matters


to


gold, echoed RBC Wealth Mana g ement m a n a g i n g director George Gero. “If are going to have a hard Brexit


or a negotiated Brexit will make a big difference. As it is, if you have a hard landing, you are going to probably impact gold because there could be some selling to support the pound. Otherwise, a lot of it has been priced in already,” Gero stated.


Gold has taken a breather recently, capped by strong U.S. dollar and growing risk appetite, explained Gero. But, despite a “rocky road”


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