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Gold Price 'Could Hit $1400' in 2019 as GLD Expands, UK Hits Leadership Crisis 15 Weeks Before Brexit

GOLD PRICES edged higher for Dollar investors on Wednesday morning but slipped against the Euro and British Pound as the UK's ruling Conservative Party called a vote of no confidence in Prime Minister Theresa May and her handling on the Brexit process – set to see Britain leave the European Union 15 weeks from now.
 
Euro gold prices held below €1100 per ounce – yesterday's new 6-month high – as the single currency rose following stronger than expected Eurozone industrial data and flat US consumer-price inflation figures.
 
Rising $5 to $1246 per ounce, the gold price in US Dollar terms held $3 down for the week so far.
 
It has now averaged $1269 per ounce in 2018, adding 0.9% for the year after adding 0.6% in 2017.
 
Having forecasted an annual average price of $1312 for 2018, Chinese-owned bullion bank ICBC Standard now forecasts a 2019 price of $1293 and then $1300 in 2020.
 
Chart of annual average gold price in US Dollars. Source: St.Louis Fed
 
US financial services group Bank of America-Merrill Lynch meantime forecasts a spike as high as $1400 per ounce for next year, led by volatility in other financial assets.
 
"True, gold prices will not spike until there is a meaningful shift in some the recent market trends," BAML analysts explain.
 
"But we believe the spike in the VIX [index of US stockmarket volatility] is already setting the stage for that reversal, while the twin US trade and government budget deficits could come into focus as we head into 2019."
 
The New York-listed SPDR Gold Trust (NYSEArca:GLD) – the world's largest gold-backed ETF – yesterday grew 0.4% in size as investor demand expanded.
 
Needing 763 tonnes of gold to back its shares however, the GLD has barely changed in size since this time last month, back when gold prices were trading over $40 below today's level.
 
Chart of SPDR Gold Trust (NYSEArca: GLD) vs gold price. Source: BullionVault
 
Back in London, and forced to cancel a meeting with Ireland's Prime Minister Leo Varadkar – part of her sudden tour seeking a renegotiation of the key "Irish backstop" and trade deal elements of her Brexit package – Theresa May today vowed to win her colleagues' support, warning that "the only people whose interests would be served" by a Tory Party leadership election this close to 29 March are avowed socialist opposition Labour Party leader Jeremy Corbyn and his shadow chancellor John McDonnell.
 
Gold prices fell however for UK investors as the Pound regained half this week's drop versus Dollar, slipping below £990 per ounce – a 15-month high when reached on Monday's decision to cancel Parliament's key vote on May's Brexit deal with the European Union.
 
"The clock is ticking on a 'No Deal' exit," says one spread-betting bookmaker, "although there is now a higher chance that we could see Article 50 delayed to allow the UK more time."
 
UK government borrowing costs meantime rose on the bond market today, while the FTSE250 index of UK-focused businesses added 1.2% – lagging other European nation's domestic share indices – 
 
"For the moment we can kiss goodbye to rationality as sheer politics take over and the issues are consigned to the back seat," says long-time Brexit proponent and blogger Richard North, forecasting that the UK  "could end up with an unreconstructed 'ultra' knuckle-dragger" as Prime Minister, "although the 'no deal' outcome remains a possibility whatever happens.
 
"Just when we needed people absolutely focused, the Westminster bubble is set to take time out, and indulge itself."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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