We know the next Prime Minister of the UK. What does the nomination of Theresa May imply for the UK and the gold market?
Theresa May, the UK Home Secretary, will be the country’s next prime minister, after her final rival Andrea Leadsom withdrew from the race on Monday. David Cameron has already announced that he would formally resign by Wednesday. In some sense, this is bad news for the gold market, as a surprisingly quick and smooth change eases political uncertainty in the UK.
However, what matters more for the shiny metal is whether Britain will exit from the EU, not who governs the country by itself. Although May was in the “Remain” camp, her support was pretty lukewarm. And her latest statements suggest that she fully supports Brexit. May said that “Brexit means Brexit and we’re going to make a success of it”. She reiterated her stance on Monday, claiming that “as prime minister, I will make sure we will leave the European Union” and she promised that there would be “no attempts to remain inside the EU, no attempts to rejoin it by the backdoor, and no second referendum”. She has also a high-profile stance on immigration – as Home Secretary she imposed a rule that limits the number of non-EU citizens who can live and work in the UK to people who make more than £35,000 a year.
Perhaps it is only political theater – interestingly, May said that she “would not invoke Article 50 until the UK has secured better deals”. Another curious thing is that May officially supported remaining within the EU during the campaign, while her final rival was a strong advocate of leaving. Anyway, her support for Brexit should be positive for the gold market, as Brexit would be detrimental for the global economy. The exit process would also increase political and economic uncertainty, as the UK and the EU would enter into uncharted territory.
The take-home message is that Theresa May was chosen the new Conservative Party leader on Monday. She will become Prime Minister on Wednesday evening. The lack of a prolonged period of transition in the UK’s is negative for the gold market. However, May’s commitment to Brexit should support the price of gold, as the departure will be a long and complex process with a lot of uncertainties. The most important issue now for the global economy and the gold market is whether Theresa May will trigger the Article 50 of the Lisbon Treaty.
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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
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Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
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