Trump and Brexit Creating Precious Metals Rally

The geopolitical uncertainty of Brexit and Trump’s approaching inauguration are sending precious metals on an early rally for the year.

Britain’s Prime Minister Theresa May is clarifying her plans to ensure the UK makes a clean break from the EU’s single market, expressing the desire to remain a “good friend and neighbor in every way,” according to Bloomberg. However, her diplomatic tone is also backed by warnings about any attempts to punish the UK for its decision to leave the European bloc.

“That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend,” she stated.

Some see May attempting to have her cake and eat it too by brokering a deal that gives Britain political and economic autonomy with the same benefits of being an EU member. May wants to change membership requirements for Europe’s customers union to allow her country to keep tariff-free trade with the EU without being required to impose a tax on imports for other non-EU countries.

Some members of the EU see May’s requests as setting a dangerous precedent for the entire trading bloc. “We shall never accept a situation in which it is better to be outside the European Union,” stated Guy Verhofstadt of the European Parliament. Countries that are seen as getting too good of an exit deal may motivate other member states to consider the same move.

President-elect Trump has weighed in on the Brexit issue, predicting that other nations will also leave the EU. In a quote from the Times of London, Trump connects the inevitable departures with one of the overarching issues of his campaign: immigration.

“I do believe this, if they [EU countries] hadn’t been forced to take in all of the refugees, so many, with all the ­problems that it … entails, I think that you wouldn’t have a Brexit. It probably could have worked out but this was the final straw … I think people want … their own identity, so if you ask me … I believe others will leave.”

Recently, Trump has also renewed his disapproval of the North American Treaty Organization (NATO) calling it “obsolete” and criticizing German leader Angela Merkel for accepting “all of these illegals” into her country.

Traditionally, gold experiences bump at the beginning of the year, but unknowns surrounding the EU’s response to May’s Brexit deal and Trump’s future policy decisions are intensifying haven investing and causing traders to turn to precious metals. Also affecting gold prices is the dollar’s continued fall from its rally since the end of last year.

Gold for immediate delivery rose 0.9% to $1,212.90 an ounce on Tuesday, the highest since late November, according to Bloomberg. The jump represents a 5.7% increase for 2017.

Comex silver was up 38 cents to $17.15 an ounce while palladium was up by over 10.5% since the start of the year, according to International Business Times. Used by auto, chemical, and electronics manufacturers, palladium has benefited from “positive industrial production” and has risen 20% on an annualized basis in 2016, outperforming both silver and gold.

Hussein Sayed, chief market strategist for online trader FXTM, said he sees Trump uncertainties have short-term positives for gold, with a breakout above $1,210 “sparking a further up move towards $1,230.”

Investors could be looking at a window of opportunity for diversifying their portfolios by buying gold, silver or palladium as protection against a falling dollar and the political uncertainties that lie ahead.

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