This summer, seemingly chasing record temperatures, is also fair and carnival season. While I love flying, whether by hot air balloon or airplane, and have been through dozens of turbulent flights, wild horses couldn't drag me onto a roller coaster at one of these fairs. Then again, maybe that's something you don't have to do anymore once you've reached a certain age.
Oil prices and bond yields on a roller coaster
Financial markets, however, seem to be enjoying the roller coaster ride of the past few weeks. Brent crude recently climbed from around US$70 per barrel to US$102 per barrel, before slipping back below US$80 per barrel over the course of this week. The reason: hopes for a swift reopening of the Strait of Hormuz following de-escalating signals from the parties involved. That, in turn, helped rein in inflation expectations, which had recently risen noticeably. As a result, long-term government bond yields, which had jumped sharply last week — particularly in the wake of the Fed's policy meeting — eased somewhat as well.
Stock markets hit record highs after July correction
Stock markets saw a mirror-image move on the roller coaster. Following a marked correction in July, equities have now more than recovered — driven by hopes for a lasting de-escalation in the Middle East and a string of unexpectedly strong quarterly results from companies across the US and Europe. Both the DAX and most major US benchmark indexes reached record highs. One sign of a distinctly risk-friendly mood: nothing but sunshine, much like the view from my window here in Frankfurt.
Gold prices benefit from risk-on sentiment
Somewhat counterintuitively — after all, gold is often bought as a "safe haven" — gold prices also benefited from this risk-friendly backdrop, helped in particular by somewhat lower yields and a moderately weaker US dollar. Since I have the pleasure of talking with Manuel Koch again on Thursday morning at the Frankfurt Stock Exchange — the link to the podcast should be available on this website shortly — I'm writing these lines a little earlier than usual, already on Wednesday afternoon.
Gold price development: climbing out of the trough
This also gives me the chance to report that gold prices climbed out of the trough this week. They haven't reached quite the same heights on the roller coaster as the major stock indexes, but they have at least made it up a small hill. Gold was trading at around US$4,045 per ounce on Thursday morning of last week, then moved rather listlessly (blame the heat?) between US$4,020 and US$4,120 per ounce until this Wednesday morning — a trading range of just US$100 per ounce. Gold prices apparently didn't want to miss out on the market's good mood, though. At the time of writing, at 4:30 p.m., gold had marked an intraday high of US$4,240 per ounce — a gain of around 3.9 percent from the previous day's close.
Xetra-Gold price climbs sharply
The Xetra-Gold® price accordingly made a sizeable jump today as well. During regular trading hours, it rose from €113.50 per gram on Wednesday afternoon of last week — or a weekly low of €112.15 per gram — to around €117.90 per gram as of this writing.
Outlook: jobs report and Middle East developments in focus
On Friday, analysts and market watchers will once again turn their attention to the US jobs report for July. Overall, though, markets remain under the spell of the news on a potential de-escalation in the Middle East, which has sounded increasingly positive of late.
I wish all our readers well-functioning fans and plenty of cold drinks to beat the heat.