A calm week for precious metals – awaiting Fed and ECB announcements

Market report Michael Blumenroth – 08.06.2018

Weekly market report

Compared to the previous week, this week has seen little turbulence across the markets. This could be due to the fact that market participants are lying in wait prior to important events such as the G7 summit which kicks off in Canada today, and especially the impending central bank meetings (Fed next Wednesday, ECB on Thursday).

Which course will central banks adopt? 

The central question will be whether the US central bank is still planning a “mere” two further base rate hikes for this year or to increase its prediction to three. The ECB has signalled that during next week’s meeting it might announce its withdrawal from the government bond purchasing programme, which would mean a more restrictive monetary policy. 

The Italian issue takes a back seat

The euro rose during the course of the week because of increased selling activity against the US dollar. Meanwhile last week’s most pressing issue, the Italian government formation, moved to the background. The markets are taking a critical stance towards the new government, clearly expressed in the clear rise of returns/market interest of Italian government bonds as the week progressed.

Gold price sees slight week-on-week decline

Surprisingly, the gold price remained mostly unperturbed by movements in other markets. While gold traded at $1,300/ounce exactly a week ago last Friday morning, it had plunged to its weekly low by afternoon at $1,289.50/ounce. During the following days, it moved more or less sideways at around $1,295/ounce until climbing to its weekly high on Thursday afternoon at $1,303/ounce, making for an extremely modest trading margin of approximately one per cent. The precious metal currently trades at around $1,296/ounce.

Against the euro, the gold price similarly dropped. This, of course, was also due to the strengthening euro. In euro per gram, this meant that Xetra-Gold fell from €35.80/gram last Friday morning, after the ups and downs of yesterday afternoon, to a weekly low of 35.30 €/gram – the same point the euro was traded at its weekly high against the US dollar. This morning, the precious metal saw a slight recovery to €35.40/gram.

All eyes on G7 summit and central banks

The G7 summit will start this afternoon, and a major issue on the agenda will be US trade policy. Next week, the markets will certainly focus on the upcoming central bank meetings. 

I wish all our readers a relaxing weekend. 

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