Gold and currencies had a rocky day of trading yesterday around the Brexit vote. Theresa May’s Brexit proposal was shot down, a no confidence vote was called was called by Jeremy Corbyn, and a Brexit deal is nowhere in sight. Gold had a strong morning on Empire Manufacturing Data and retraced its early gains in anticipation of the vote.
The House of Commons defeated Theresa May’s Brexit deal by a substantial margin. They lost by over 200 votes, 432 to 202. Jeremy Corbyn notes that the margin of defeat is historic, with no vote losing by this kind of margin since the 1920s. Corbyn called for a no confidence vote that will be debated on Wednesday. May seemed somewhat abandoned by her own party during these proceedings with more than 100 of her own party members not voting for her proposal.
May has until Monday to present a backup plan to Parliament with many possibilities being in play. Given this was a crushing defeat there is very little chance that Brussels will make many concessions that could get this deal done. If the vote was close, she may have been able to go to Brussels for some concessions and could have got this deal done by Monday. But with a no confidence vote called and being so far from a deal a successful proposal on Monday seems very improbable.
Some say there is a chance for a second referendum but both May and Jeremy Corbyn have both denied that as a possibility. Most likely this thing will grind on. Most parties involved do not want to us to get to a “no deal” Brexit. Most experts say a “no deal” Brexit on the March 29th deadline would cause economic havoc. But today’s vote increased the chances of a “no deal” Brexit and no Brexit at all.
When thinking about what this means for gold we should look closely at the Pound, Euro and Dollar. The big bid up in gold at 7:30 AM CST was a reaction to the Empire Manufacturing data. The dollar strength and the selloff in gold (about 9 am CST) was a reaction to the Pound and Euro getting hit in anticipation of the Brexit vote. After the vote we saw gold catch a bid as the dollar retraced most of its anticipatory gain. As people sell Pound and Euro positions, we would expect to see gold to catch a bid as these sellers shift positioning.