A week of consolidation

Market report Michael Blumenroth – 14.10.2016

Weekly market report

Following the difficult first week in October, the past four days have been set for consolidation, most evident in the fact that the gold price in US dollar is currently trading at exactly the same price the chart showed a week ago. Gold was, however, turned over in a particularly tight weekly trading margin, which indicates that positions have become smaller and the market is seeking new direction. 

The entire trading span of the past seven days was already traded last Friday, three hours after the publication of US labour market data. The gold price initially climbed to 1,265 US$/ounce – the published data was slightly weaker than expected – just to crash to 1,242 US$/ounce shortly after. The most likely reason: sell orders below the 1,250 US$/ounce mark and, in spite of the sluggish labour market data, rising expectations for a Fed key interest rate hike in December. On Monday, the gold price tried and failed to reach the 1,265 US$/ounce mark. Generally speaking, it suffered from the US dollar’s rise, which continued until yesterday and was due to the expected Fed interest rate increase priced in at a probability of close to 70 per cent. In addition, the US dollar profited from the fact that the polls see a clear advantage of Hillary Clinton against Donald Trump in the upcoming presidential election, following the second TV debate on Monday night. The gold price was also slowed down by the crash of the South African rand (one of the major gold producing country’s currencies). In spite of this, the precious metal remains steady at the previous week’s level, currently trading at 1,256 US$/ounce. 

Xetra gold profited from the weakening euro against the US dollar during the course of the week. From 36.30 €/gram exactly a week ago, with a daily low of 35.90 €/gram last Friday afternoon, it climbed to 36.85 €/gram yesterday, currently trading at roughly 36.65 €/gram. 

This afternoon, we expect the publication of the US retail sales data as well as a statement by Janet Yellen. Next week, we will see Chinese GDP data and the final televised debate between Clinton and Trump. The quarterly reporting of a number of companies will prevent the markets from indulging in any kind of ennui. The question for gold investors will be whether the yearning for safe havens will again increase.

To all our readers: have a happy and restful autumn weekend.  

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