Gold Prices in Sterling Climb to 7-Week High while Pound Crashes to 7-Month Low as Prime Minister Theresa May's Gamble Backfires

GOLD PRICES in Pounds rallied to a 7-week high of £1007 on Friday morning in London as the Dollar strengthened but Sterling tumbled after fired FBI's director James Comey told US lawmakers that he had "no doubt" that Russia had interfered with the 2016 presidential election and the incumbent UK Prime Minister Theresa May's Conservative Party lost their majority in a snap election, writes Steffen Grosshauser at BullionVault.

 

The outcome of the UK election threw the country in a political turmoil just 10 days before the start of the Brexit negotiations, as the Conservative Party was on course to win 319 seats, down from 330 before the campaign and short of the 326 seats needed for an overall majority. 

 

As May's gamble to call for an early election to win a stronger mandate backfired and ended in a "hung parliament", uncertainty over the direction and timing of the negotiations to leave the European Union increased.

 

As the election results trickled in, the British Pound crashed as much as 2.5% to an 8-week low against the Dollar and a 7-Month low versus the Euro.

 

"We're not dancing and celebrating the uncertainty," an official involved in the Brexit preparation on the EU side is quoted by the Financial Times today. "It will make things more complicated, and it was [already] complicated enough."

 

"The weakness in the pound has pushed up gold prices in sterling," according to Madhavi Mehta, an analyst at Indian Kotak Commodity Services Ltd. "The pound has weakened amid prospects that the Brexit negotiations will be long and arduous."

 

"The poll verdict could create mild risk aversion which should be mildly supportive for gold; but depends on what sort of negotiations take place between the EU and UK [over the Brexit]," reckoned John Sharma, analyst at the National Australia Bank.

 

Meanwhile, most European stocks climbed with the internationally-facing FTSE 100 up 0.4% surging above 7,500.

 

The US Dollar already started rising the previous day after the European Central Bank kept interest rates unchanged and lowered its inflation forecast and ex-FBI director James Comey gave testimony about his meetings with US President Donald Trump. 

 

In front of the US Senate Intelligence Committee, he accused Trump of having fired him because of the FBI's investigation over a possible collusion by his campaign team with Russia to influence last year's presidential election, but did not make it clear whether the President obstructed justice. 

 

"The road is bumpy and the price follows, but assuming no major armed conflict in sight, or any other developments that may result in an impeachment process of President Trump, we believe [gold] prices will bounce back and forth in response to performances of other assets classes," says Joshua Rotbart of bullion services providers J.Rotbart & Co in Hong Kong. 

 

As gold priced in Pound later fell back to trade around £1000 per ounce, Dollar-denominated gold was also down at $1273 per ounce, just below the 10-day moving average of $1275 and set to see its first weekly loss in five weeks.

 

In other precious metals, silver measured in Dollar slightly fell but rallied for UK investors back to a level around last week's close of £13.62 per ounce, while platinum rose 0.5% and palladium jumped to $862 - its highest in nearly three years.