As the dust cleared from a busy Thursday, the gold price opened about $12 per ounce lower, or down almost 1%, to trade at $1,265.50/oz on Friday morning. Spot silver fell more than 1.2%, losing 22¢ to $17.20/oz.
In a swift reversal of expectations in yet another election, the Conservative Party lost its majority in the U.K. Parliament as a result of Thursday’s election. The surprise showing by the Labour Party was seen as increasingly likely over the past week or so, but still a long-shot.
Although the country’s traditional center-left party still holds less seats than the Tories, the election result has effectively denied a unified Tory government from forming. (This is known as a “Hung Parliament.”) The Tories lost 12 seats while Labour picked up 31. As a consequence, whatever political coalition ultimately forms Britain’s ruling majority will have to be made up of more than one party. Theresa May is likely to be replaced as prime minister and head of the Conservative Party, as well.
One of the main reactions to the election outcome was a weakening of the pound sterling. The pound plunged 1.5% in the wake of the results to trade at $1.27. Accordingly, the dollar rose 0.6% on the DXY index this morning, registering at 97.5. Banking stocks in the U.K. also fell after the vote, although stocks around the world were mostly higher on Friday morning.
Hidden In Plain Sight
Amid all of the hubbub in Washington yesterday with ousted FBI Director James Comey’s testimony about his interactions with President Trump, hardly anyone noticed that the House of Representatives passed legislation that greatly curbed the Dodd-Frank restrictions on the banking sector that were put in place following the financial crisis. The GOP has long argued that these regulations have hampered growth in the private sector. The bill now goes to the Senate, and likely stands a better chance of passing that chamber than most of the projects—tax cuts, infrastructure spending, healthcare reform—that are currently being worked on.
While deregulation is one priority that Republicans in Congress and the White House seem to agree on, abuses by the financial industry are not simply a thing of the past. If anything, it’s advisable that the legislature reintroduce the Glass-Steagall law that was repealed by President Clinton. It made it impossible for banks that take deposits to also speculate in the markets. Essentially, the Depression-era law kept commercial banking separate from traditional lending activity to reduce the risk of Wall St gambling with the public’s money. While many have called for bringing back Glass-Steagall, a successful effort to undermine Dodd-Frank would appear to be a move in the opposite direction.
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