US economic data is usually the focus of attention in the first week of a new month. After all, barring any unforeseen circumstances (such as the recent shutdown of government offices and agencies in the US), economic data from the US, particularly leading indicators and labor market data, are on the agenda. In this first week of March, however, everything is different, with the markets driven almost exclusively by news on developments in the Middle East.
Gold price reacts early to geopolitical tensions
Last Friday, the gold price rose noticeably as some market players were in a cautionary mode ahead of the weekend, in anticipation of a possible escalation of the conflict in the Middle East, thus heading for safe havens. With the actual events that then took place over the weekend, gold prices rose on Monday to their highest level since the record high at the end of January, before falling back noticeably on Tuesday.
Profit-taking and liquidity requirements weigh on markets
These developments are primarily due to some market players having to close positions to offset losses in other market segments or to increase their liquidity to meet margin calls on futures markets. This strategy is most successful for positions that are clearly in the profit zone, which primarily caused price setbacks for the leading stock market indices in South Korea and for precious metals on the commodity markets.
Strong US dollar and rising bond yields slow down gold
The significant appreciation of the US dollar against almost all other currencies and the noticeable rise in government bond yields around the globe slowed down gold prices, as did the pricing out of possible interest rate cuts by central banks due to the uncertain situation on the financial markets. For example, while on Friday the ECB interest rate cuts for 2026 were still factored in at 0.10 percentage points, market participants on the futures markets took a U-turn. Due to the inflationary risks posed by rising oil and natural gas prices, they are currently factoring in interest rate hikes of more than 0.10 percentage points by the end of the year.
Uncertain overall situation causes high volatility
The overall situation remains unclear and volatile. Any news regarding the Middle East conflict can result in noticeable price movements. In particular, the closure of the Strait of Hormuz, which is impeding oil and natural gas supplies to Asia, remains a major issue on the markets.
Gold price development in recent days
After trading at 5,185 US$ per ounce last Thursday morning, gold prices rose to 5,280 at the end of the week and continued to climb rapidly to 5,419 on Monday morning. On Tuesday, the above-mentioned setback occurred, which took until the afternoon to slow at around 4,997. Yesterday morning, prices briefly exceeded the 5,200 mark at 5,206 US$ per ounce, but lost traction over the course of the day. At the time this report was written on Thursday morning, gold traded at 5,165 US$ per ounce.
Xetra-Gold benefits from Euro weakness
The Xetra-Gold price was moderately supported by the depreciation of the euro against the US dollar, rising from 141.10 € per gram last Thursday morning to 142.40 at the end of the week and 148.85 at the start of trading on Monday morning. Mirroring gold in US dollars, it dropped sharply to a weekly low of 139.25 on Tuesday afternoon before recovering to 143.70 on Wednesday morning. It currently trades at around 143.00 € per gram.
A look at US labor market data
At present, virtually all market movements are likely to be heavily influenced by developments in the Middle East. Nevertheless, it may also be worth keeping an eye on US labor market data, scheduled for publication tomorrow (Friday).
Despite the uncertain global situation, I wish all readers a sunny early spring weekend.