Gold Price Extends Rally on Brexit Chaos, U.S. Bond-Yield Volatility

Gold climbed back above $1,300 on Wednesday after British parliament rejected Prime Minister Theresa May’s second Brexit plan, setting the stage for a chaotic exiting exit from the European Union (EU).

Precious Metals Rally

Gold for April delivery rose $9.70, or 0.8%, to $1,307.80 a troy ounce on the Comex division of the New York Mercantile Exchange. That was the highest level in two weeks. Since bottoming in the mid-$1,280 range last month, gold has rallied 1.9%. The yellow metal has gained more than 2% in 2019.

Silver futures climbed 7 cents, or 0.5%, to $15.49 a troy ounce, also the highest in two weeks.

The U.S. dollar, which normally trades inversely with previous metals, posted its fourth consecutive decline on Wednesday. The dollar index (DXY) fell 0.2% to 96.72. It traded as high as 97.67 last week.

Brexit Chaos Roils Markets

British lawmakers Tuesday shot down Prime Minister Theresa May’s amended Brexit deal, putting the world’s fifth largest economy in unknown territory on how to proceed. On Wednesday, lawmakers will vote on whether to leave the EU without a deal or delay the March 29 divorce date.

May has confirmed that she will vote to block a no-deal Brexit amid growing pressures from the opposition to abandon her exit plan. Chancellor Philip Hammond has warned that a no-deal Brexit would have grave consequences on the British economy, which experienced a sharp cooldown in the fourth quarter.

Hammond says avoiding a no-deal Brexit would give British parliament “the opportunity to start to map out a way forward towards building a consensus across this house for a deal we can, collectively support, to exit the EU in an orderly way.”

British lawmakers are set to vote again at 3:00 p.m. ET.

U.S. Inflation Muted

Gold is also benefiting from falling U.S. government bond yields after the Labor Department reported disappointing inflation data on Tuesday. The consumer price index (CPI) rose in February for the first time in four months but registered its weakest annual growth clip in nearly two-and-a-half years.

Inflation is slowing at a time when the U.S. Treasury yield curve is on the brink of inversion, a phenomenon that usually portends economic recession. Read more: U.S. Stocks: Does Weak Inflation Portend Recession?

In other data news, producer inflation also came in below forecasts in February, the Department of Labor reported Wednesday. The producer price index (PPI) climbed 0.1% during the month compared with forecasts calling for 0.2%. Annually, PPI rose to 1.9%, down from 2% the previous month.

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Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi