In recent days, the precious metals markets have been busy finding a new price equilibrium. Following the sharp decline at the end of January/beginning of February, which followed record highs for gold, silver, and platinum, many market players were unsettled. In addition, many traders and investors were likely unable to fully liquidate their loss-making options and futures positions. As soon as precious metals prices somewhat recover, these positions are therefore next in line for divestment, which could, in turn, hamper further price recoveries.
Meanwhile, China has kicked off the Year of the Fire Horse. From experience, I can report that the Chinese like to go all out with fireworks in their New Year celebrations, which means that the entire country is virtually in holiday mode for a week, putting the recently robust demand for ETCs and physical precious metals from China on hold for the time being.
Restrained gold price development
Last week’s US economic data painted a mixed picture. Slightly lower US consumer price inflation rates somewhat supported the view of many market participants that the US Federal Reserve would continue to lower key interest rates from June or July onwards after a pause in the spring. This resulted in lower yields on US government bonds, which in turn supported gold prices. Ultimately, however, the current lack of demand from China seems to have gained the upper hand, and as a result, recent price developments have been rather subdued.
While gold prices stood at 5,050 US$ per ounce last Wednesday afternoon, they came under pressure again over the following days, dropping to around 4,655 on Monday morning, 9 February, but recovering by more than 300 US$ per ounce intraday. On Wednesday, 11 February, gold traded at just under 5,120 US$ at midday. Over the following days, gold prices mostly fluctuated between 4,900 and 5,100 US$ per ounce, with the 5,000 mark mostly in sight. At the time of writing this report on 18 February at 4:00 p.m., gold is trading at 4,990 US$ per ounce.
Xetra-Gold week-on-week
The Xetra-Gold price moved along similar lines, as the euro/US dollar exchange rate had little impact. Xetra-Gold dropped from 137 € per gram on Wednesday afternoon to 130.90 the following day. Its most recent high on 11 February was 138.10. Following a setback to 131.50 this past Tuesday, Xetra-Gold currently (Wednesday afternoon, 4:00 p.m.) trades at around 135.60 € per gram.
Further inflation data from the US is scheduled for publication on Friday, and China will be back in action next Monday after the New Year celebrations. The question remains as to what extent other participants in the gold market still intend to close their positions and at what point the market could be sufficiently adjusted that a possible rise in demand might provide stronger support, which many market observers continue to regard as the base scenario.
I wish all readers continued strength of nerve and hope that we may all gradually look forward to something resembling a sunny, warmer spring.