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Gold Prices Inch Above $1950 On Brexit No-Deal Fears

Gold prices
Gold prices

Gold prices are up today as fears of a no-deal Brexit have re-emerged. This is all due to the latest proposal by the UK government to enact a law that could violate the Brexit Withdrawal Agreement. The new Internal Markets Bill seeks to allow the Northern Ireland secretary to take decisions on state aid to businesses in Northern Ireland that could be at odds with article 10 of the Brexit Withdrawal Agreement. 

The EU has voiced its opposition to this new bill in robust terms, saying that adoption of the Internal Markets Bill would violate the Withdrawal Agreement as well as international law.

The UK side continues to downplay the bill while asserting its right to protect its internal market. Reuters reported a UK PM Spokesman as saying that the UK remained committed to a deal with the EU but insisted that the UK Parliament would understand the importance of preserving its internal market. 

The situation has provoked risk aversion in the markets, sending gold prices 0.55% on the day to trade at 1956.28 as at the time of writing. 

Technical Outlook for Gold Price

Gold price on the XAUUSD daily chart indicates that the yellow metal continues to trade in a range, bordered by 1980.74 to the north and 1918.68 to the south. Further upside in gold prices will put the ceiling of the range under pressure, especially if the Brexit feud between the EU and UK lingers. A break above the 1980.74 price level opens the door towards the 2008.04 target (18 August high and 38.2% Fibonacci retracement from the swing low of 15 July to the swing high of 7 August). 

On the flip side, an easing of tensions between the EU and UK could provide a return to risky sentiment, which allows the gold price to aim to drop below 1900, targeting the 1869.39 or even 1821.55 support levels along the way. However, this drop has to take out the 1918.68 range floor and 1900.76 psychological support along the way to materialize.

We could also see some range trading if there is no clear direction from the Brexit events, in which case the 1980.74 and 1918.68 price levels could define the trading range for some days to come.  

XAUUSD Daily Chart