100

The gold price rally kicked off three weeks ago on Friday and has continued in recent days, reaching new record highs almost daily – the mystery behind the headline ‘100’ will be explained below. Since the speech of Fed Chairman Jerome Powell in Jackson Hole, gold prices have risen by around ten per cent at their peak. They saw a significant boost last Friday when US labour market data once again fell short of expectations. As a result, a Fed interest rate cut next week was firmly factored into the futures markets, with a still relatively low probability of a 0.5 percentage point cut instead of the current market consensus of 0.25 percentage points. With gold prices exceeding the 3,600 US$ per ounce mark, they are likely to have taken a more prominent position on the radar of many trend-following investors, as reflected in follow-up purchases.

Gold ETCs in high demand

Incidentally, it is interesting to note that demand for gold ETCs has recently shifted back from Asia to the US and Europe. World Gold Council data shows that US investors had been selling gold-backed ETCs in the days leading up to Powell’s Jackson Hole speech, but demand has since resurged. August saw new net investments valued at 4.1 billion US$ in the US and 1.9 billion US$ in Europe. The inflows continued unabated in September, with Monday recording the strongest gold purchases in ETCs in three months. Although central banks’ appetite has waned recently, they have remained active: earlier this week, China reported further purchases for August. ETC investors and speculative investors on the US futures exchanges are likely responsible for the recent gold rally.

Gold price tops 3,600 US$ per ounce

What seemed like an unchecked rise in the gold price only slowed down slightly yesterday. From 3,530 US$ per ounce last Thursday morning, it rose to 3,600 following the publication of once again disappointing US labour market data. The new week saw the gold price gaining further momentum, rising to 3,674 on Tuesday afternoon and since consolidating at a high level of above 3,620 per ounce. Gold started today’s trading at around 3,630, which is 100 US$ per ounce above last week’s level.

Xetra-Gold at record high

The Xetra-Gold price was only slightly slowed down by the stronger euro exchange rate, rising from 97.40 € per gram last Thursday morning to around 98.40 following the publication of US labour market data. The rally has gained momentum since the beginning of the week, with Xetra-Gold for the first time exceeding the 100 € per gram mark to a new record high of 100.55 € per gram on Tuesday afternoon. Mirroring the development on the US dollar gold market, consolidation followed. Yesterday afternoon, Xetra-Gold traded at 100 € per gram, and if the 7:00 price holds until the market opens, it will start trading this morning at around 99.85.

This afternoon, the markets will turn their attention to US consumer price data for August, which should not stand in the way of a key interest rate cut by the Fed on Wednesday. The question is: How large of a cut will it be? In contrast to the Fed, this afternoon’s ECB meeting is not expected to have a significant impact on the markets, as the ECB is expected to keep the key interest rate stable. The gold price rally may lose some of its momentum for the time being, but the outlook remains golden in the medium term.

I wish all readers a relaxing weekend.