Week number eight since the start of the escalation of hostilities in the Middle East continues to bring new developments almost daily. A glance at the record highs reached by many benchmark US stock indices in recent days, however, shows most financial market participants’ expectation that a sustained de-escalation will soon occur, or at least renewed sharp escalations are deemed unlikely.
US policy and ceasefire: Trump decision brings clarity
However, the situation remains unclear. US President Trump once again clarified that, in his view, the ceasefire would end today (Wednesday). And indeed, Trump last night announced the indefinite extension of the ceasefire.
Precious metals and currencies: subdued trading despite short-term swings
Most recently, prices for precious metals and currencies have remained largely immobile. Last Friday saw increased movement after Iran announced it would lift the blockade of the Strait of Hormuz. The euro rose against the US dollar to its highest level since mid-February, and the gold price was up by about two percent. However, after Iran reclosed the Strait of Hormuz on Saturday (the US had not ended its blockade) and thus no real, sustainable progress had been made, the precious metals and currency markets have remained subdued since the start of the week in a cautious wait-and-see approach.
Gold price: fluctuations between geopolitical uncertainty and market sentiment
While gold still traded at around 4,830 US$ per ounce last Thursday morning, it jumped to 4,889 on Friday following the above-mentioned news and reverted to 4,830 by the end of the week. After a dip to 4,730 on Monday due to a lack of tangible progress in the Middle East, the precious metal rebounded to 4,830 on Tuesday before a somewhat risk-averse sentiment caused prices to fall to 4,724 yesterday. On Wednesday morning, gold is trading at around 4,765 US$ per ounce.
Xetra-Gold: slight losses over the course of the week
Xetra-Gold also edged lower, rising from 131.50 € per gram at the start of trading last Thursday morning to around 132.75 at the weekly high on Friday afternoon. It weakened to 131.00 on Monday and to a weekly low of 129.20 yesterday. This morning, Xetra-Gold was expected to kick off trading at around 130.40 € per gram.
Outlook: focus on central bank meetings and geopolitical risks
While several central bank meetings are on next week’s schedule, developments in the Middle East are likely to continue to set the tone.
I wish all readers a happy spring weekend.