Gold futures are trading higher shortly before the regular session opening. A weaker Dollar is helping to generate the support, off-setting a rise in U.S. Treasury yields and increased demand for higher risk assets. The early price action indicates gold traders could be in for a wild ride today because we’re in a news driven market.
At 11:44 GMT, April Comex gold futures are trading $1296.30, up $5.20 or +0.40%.
The key event driving the price action on Tuesday is the news that the European Commission has accepted amendments to the UK’s Brexit deal. When first announced, the British Pound soared, putting pressure on the U.S. Dollar. This helped boost demand for the dollar-denominated gold. However, gains were limited by a surge in demand for risky assets.
According to reports, European Commission chief Jean-Claude Juncker on Monday agreed to an updated Brexit deal with British Prime Minister Theresa May to make the agreement more palatable to UK lawmakers. The updated Brexit deal boosted Asian shares ahead of a vote in the British parliament on a divorce agreement.
Gold traders are likely to remain on edge throughout the session on Tuesday as investor tension will be firmly focused on the Brexit deal in the U.K. when British Members of Parliament (MPs) vote Tuesday evening on whether to accept or reject May’s deal ahead of the scheduled March 29 departure from the EU.
Late-breaking news indicates that the agreement may be in jeopardy after Britain’s Attorney General Geoffrey Cox published his opinion on Prime Minister’s Theresa May’s recently amended Brexit deal.
Cox said Tuesday that legal risks to Brexit still remain despite the late-night concessions from the European Union on Monday. He added that the revised document did not give Britain any legal means of exiting the “Irish backstop” arrangements unilaterally.
“The legal risk remains unchanged that if through no such demonstrable failure of either party, but simply because of intractable differences, that situation does arise, the United Kingdom would have…no internationally lawful means of exiting the Protocol’s arrangement, save by agreement,” Cox said in the statement.
The British Pound plunged on the news, sending the U.S. Dollar higher and putting some pressure on gold. Today is likely to be a volatile session due to the developing events, but the early price action indicates that gold traders should keep an eye on the movement in the Sterling and the U.S. Dollar.
This article was originally posted on FX Empire
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