Britain’s new Prime Minister, Theresa May, has come into the position post the Brexit vote despite officially supporting the Remain in the EU campaign.  However her statements and actions since her ascendancy to the UK’s top political position suggest she may have been at best lukewarm in her support for the Remain campaign, and perhaps at heart a closet Brexit supporter.  One suspects there may be more to her initial decisions since her ascendancy to the Conservative party’s leadership than just an attempt to unite the party, which only has a slim majority in the UK’s Parliament.

One of her first statements on achieving the party leadership was that ‘Brexit means Brexit’ – an extremely adamant position which she will not be able to back away from, even though the country is hugely divided given the closeness of the vote and a petition signed by over 4 million people to implement a referendum re-run – surely a non-starter.  Because you don’t like the result doesn’t mean you should immediately call for a second vote. Even the Scots didn’t do that after a close independence referendum.

Also her initial Cabinet appointments putting some strong Brexit supporters into key ministerial positions (the charismatic, but highly controversial Boris Johnson as Foreign Secretary and longtime EU sceptic David Davis as Minister for Exiting the EU for example) indicates an additional determination to proceed with the negotiated exit, albeit perhaps not quite as quickly as some EU leaders might appear to prefer.  The exit will not happen until Article 50 is invoked by the UK and current indications are that this might not be until next year – and then there would be a 2-year countdown to the break – so the UK is likely to remain an EU member until 2019 at least.

So what does all this mean for the UK economy – and that of Europe and the rest of the world?  It will certainly be a destabilising influence on the rest of the EU where many member nations have their own anti-EU movements to deal with.  This is why the rhetoric from a number of national leaders is to play hardball over the UK exit, although the economics of so doing would almost certainly be counter-productive for their own economies.  In the event one suspects economics will win out and deals will be quickly renegotiated, particularly as the UK remains either the biggest or second largest market for trade from other EU nations depending on whether this relates to goods or goods and services – but of huge importance regardless.

The big sticking point may well be the free movement of EU nationals in and out of the UK, but there is the possibility that some fudge will be made here of at least partial satisfaction to both sides.

But it is EU instability which will be the most significant factor here.  Polls suggest that many EU nations, and in particular some with the biggest economies, have huge underlying anti-EU sentiment, but whether this would be sufficient to a move to actually exit from the Union is perhaps much more difficult to judge, but it could put the EU project – in particular with regard to ever-closer political union – into jeopardy.  It is this uncertainty which will impact the global economy perhaps for years to come and could well be a stimulus for precious metals as a continued safe haven investment.

Regarding gold, there has been a substantial post-Brexit drop in value over the past few days after a big rise immediately after the vote.  Ironically this has coincided with the publication of bullish forecasts from a number of bank analysts – perhaps these should be seen as a contra-indicator.  After all at the beginning of the year many of these were then preaching a gold price collapse and were hugely wrong then.  They could be equally wrong now.  So much for ‘expert’ predictions!  While the gold price fall has not reached freefall levels yet the trend looks to be downwards – but for how long?

Withdrawals from, or purchases into, the big gold ETFs – for which SPDR Gold Shares (GLD) – is probably the best proxy being the biggest of them all – is a key indicator.  After a big sell-off in the GLD holding on Tuesday, yesterday saw no change, but future day-to-day purchases or sales will likely be very closely followed by the precious metals markets.  Given the big rise in gold and silver prices immediately after the Brexit vote a degree of profit taking is to be expected – particularly in the UK where big gains had been made with the combination of a dollar gold price rise and a sharp fall in the pound sterling’s parity against the dollar.  The pound appears to be stabilising, although could be knocked back a little further if the Bank of England, cuts interest rates by 25 basis points today, as expected, although this could already be factored into current sterling levels against the dollar and the euro.

We would expect the UK economy and indicators to stabilise – or even improve – as the negatives and positives of a UK exit become more apparent.  Certainly the UK stock market seems to suggesting this with the FTSE100 index riding high at around its highest level since August last yearand even the FTSE250 – seen as more representative of the UK economy as a whole, picking up well and now only around 2.5% down on its high point for the year reached immediately pre the Brexit vote when a Remain outcome was seen as something of a certainty.  Indeed it is now up 12% plus since the actual outcome of the vote became apparent.  This does not suggest an economy in crisis as many still-smarting Remain campaigners and EU leaders have been suggesting.  The pound has been the only real indicator to suffer seriously so far and, as noted above this seems to be stabilising and we would not be too surprised if it should recover perhaps half the ground lost, or more, over the next few weeks and months.

But, uncertainty will persist as the post Brexit vote ramifications unwind, and could receive another setback if and when Article 50 is actually invoked.  If Brexit truly does mean Brexit, and this may not have played out fully yet, then the fallout will continue across Europe and in the UK, and all this would seem to be positive for precious metals in the medium to long term.