While uncertainty about the future course of hostilities in the Middle East persists, financial markets appeared, until last night, to believe President Trump’s announcements that the war would be over within the next two to three weeks. Since these statements were first made on the Eve of 1 April European time, US financial markets reacted as early as 31 March, and here in Europe on 1 April with a sharp rise in stock and bond prices and a return of risk appetite.
Focus on oil prices: market participants watch every move
Traders and analysts continue to keep a close eye on oil price movements, which had started to decline following Trump’s remarks leading up to his televised address. Brent crude, for example, intermittently dropped below 100 US$ per barrel yesterday, after trading at around 113 US$ per barrel at the start of the week. This changed at 3:00 CET this morning when Trump announced in a televised address that Iran would be hit hard within the next two to three weeks. In the meantime, however, he asserted that Iran talks would continue. Overall, developments across the financial markets still heavily depend on the Strait of Hormuz, whether and when it will be reopened or made navigable for commodity exports from Middle Eastern countries.
Gold price between geopolitical uncertainty and interest rate expectations
The gold price strengthened through last night, as expectations of interest rate hikes by central banks around the globe somewhat scaled back due to falling oil prices, resulting in declining government bond yields. In addition, the US dollar depreciated moderately, which also supported the gold price. A countermovement ensued following Trump’s speech last night.
Moderate recovery on the gold market
Nevertheless, sentiment regarding gold prices has improved moderately overall since the end of last week. While gold traded at 4,440 US$ per ounce on Thursday morning last week, it dropped to just over 4,350 by Thursday evening. After closing the week just below the 4,500 US$ per ounce mark, the precious metal gained traction Monday afternoon and reached exactly 4,800 this morning at 1 a.m. At the time of writing this report on Thursday morning, however, gold has weakened to 4,605. Over the first quarter which ended on Tuesday, gold did gain around eight percent in US dollars despite the setback in March (down nine percent compared to the end of February), a return which many other assets can only dream of.
Xetra-Gold: steady rise since start of the week
The Xetra-Gold price also strengthened, from just under 123.50 € per gram at the start of trading last Thursday morning to about 122.20 by the evening of the same day. After closing the week at 126 € per gram, Xetra-Gold trended upward day by day since the start of the week. Yesterday, it traded at just under 132.50, marking the weekly high so far. This morning around 8 a.m., it opened trading at around 128.50.
Outlook: news flow remains decisive for market developments
The flow of news regarding the situation in the Middle East continues to determine oil prices and virtually all other asset classes. Good Friday will see the release of US labor market data for March, which many market participants will be watching closely.
I wish all readers a peaceful Easter weekend.