Gold prices received a boost last Friday due to renewed uncertainty about US customs and trade policy following the US Supreme Court ruling. The court declared the basis for most of the import tariffs imposed by US President Trump last year to be unlawful, to be lifted immediately. The financial markets were less interested in the question of whether the considerable customs revenues would have to be refunded to importers. The more vital question was what the future would hold for US trade policy.
New US tariffs cause additional volatility
On Tuesday this week, new tariffs came into force, which now amount to 10 percent globally and are soon to be raised to 15 percent, applicable until 24 July. For the period after that, the US government has announced – as of today – new tariffs on a different basis. As financial markets do not like uncertainty, safe havens were in demand. The Swiss franc, government bonds, and gold in particular benefited from this development.
Geopolitical risks and futures markets provide additional support for gold
The ongoing negotiations between the US and Iran over Iran’s nuclear program are likely to be reflected in the markets in the form of a geopolitical risk premium. The mood on the options and futures markets also appears to have turned more optimistic last week, with speculative market players increasing both their net long (buy) positions in gold futures and, to a greater extent, on the options markets. Options with underlying values well above the current price level were particularly in demand here. Some market participants therefore expect strong upside potential. If demand from China also rebounds after the holiday week due to Chinese New Year celebrations, gold prices could stabilize at a high level in the short term.
Gold price developments over the past week
After trading at 4,990 US$ per ounce last Wednesday afternoon gold prices rose fairly steadily over the following days, reaching just under 5,250 on Tuesday night at the start of trading in Asia. However, despite the reopening of trading in China, the immediately expected strong demand failed to materialize, leading to profit-taking, which caused an intraday setback to 5,100. The gold price in US dollars has since mostly fluctuated between 5,150 and 5,220. At the time of writing this report on Thursday morning, gold is trading at 5,185 US$ per ounce, around four percent above last week’s level.
Xetra-Gold follows the international trend
The Xetra-Gold price moved largely in parallel to gold in US dollars, rising from 135.60 € per gram on Wednesday afternoon to 142.15 on Monday afternoon. After also seeing profit taking, it dropped to around 139 on Tuesday afternoon before rising back to just under 142. Xetra-Gold currently trades at around 141.20 € per gram.
Outlook: Focus on month-end and US economic data
Today and tomorrow, month-end dispositions are likely to dictate the price direction. Next week, various US economic data are on the data calendar, including February’s labor market report.
I wish all readers a sunny pre-spring weekend and a good start to the month of March.