Last Wednesday evening, many readers likely witnessed the natural spectacle of the sun being partially darkened by the moon's shadow. The author of these lines was at an open-air concert and missed the whole thing entirely. Gold prices, too, have basked in sunshine over the past few days — interrupted only briefly on Friday by a short-lived pullback.
Weak US economic data lifts gold
On the whole, gold received further tailwind over the past few days from a run of below-expectation US economic data, with retail sales figures disappointing most recently. From a financial-market perspective, this lowered the probability that the Federal Reserve will raise interest rates in the coming months, which tends to support gold prices.
Treasury announcement fuels price jump
Just as gold seemed to be struggling somewhat after its rally over the past two weeks, a headline crossed the tickers yesterday afternoon that provided a solid tailwind: the US Treasury Department announced an expansion of its buybacks of long-dated government bonds, pushing down yields that had risen sharply over the previous two days. Following the drop in yields, the US dollar also weakened noticeably, falling against the euro to its lowest level since early May. Gold closed yesterday more than 4 percent higher than the previous day's close.
In the very week that had been expected beforehand to be markets' quietest of the summer, things got lively indeed. What's likely to keep gold prices from growing to the sky, however, are oil prices, which have risen noticeably over the past few days amid a lack of progress in the Middle East conflict. This could keep inflation elevated over the medium term and thereby prompt interest rate hikes by central banks around the globe.
Gold's weekly path: from pullback to fresh high
Gold prices stood at around 4,385 US$ per ounce last Thursday morning, slipped to an intraday low of 4,312 on Friday, but ended the week at 4,375. After trading mostly sideways around the 4,400 mark since the start of this week and drifting lower yesterday morning as oil prices kept climbing, the news mentioned above about the US Treasury's bond buybacks saved the day for gold bugs. This week's high so far was marked overnight at around 4,527. At the time of writing, gold is trading slightly lower at 4,485 US$ per ounce.
Xetra-Gold price rises in tandem
The Xetra-Gold price thus also gained ground compared with the previous week. During regular trading hours, it initially fell from 122.50 € per gram last Thursday morning to 120.20 € on Friday. Yesterday afternoon, the price then climbed to 124.40 € and opened today's trading session at 123.60 € per gram.
Outlook: central bank rate decisions in focus
With the Fed's Jackson Hole symposium taking place on the last weekend of August, the end of summer is gradually coming into view — the shortening days are a reminder of that too. In September, central bank monetary policy is likely to take center stage, as nearly all major central banks gather for rate decisions. In the days and weeks ahead, gold prices are therefore likely to keep taking their cues from data that will help guide central banks' policy decisions. Gold traders will continue to keep an eye on government bond yields and oil prices.
I wish all readers a few beautiful, golden late-summer days.