Autumn storms

Market report Michael Blumenroth – 07.10.2016

Weekly market report

The Caribbean has been hit hard by a hurricane, and it might reach Florida by this afternoon. Some markets are seeing similar turbulences, with pound sterling hitting an especially rough patch. Last night, it temporarily lost a full six per cent against the US dollar.

Precious metals were also left out in the cold, with plunging prices apparently caused by two major sell orders at the start of trading on the New York futures markets on Tuesday afternoon CET. Exactly a week ago, gold traded at 1,325 US$/ounce and remained relatively steady until Tuesday afternoon at 1,310 US$/ounce, but the sell orders caused a cascade of further selling, especially following the breakthrough of the 1,300 US$/ounce mark, which had been steadily upheld as the lower threshold since the Brexit vote on 24 June. Investors either sought to limit their losses or take profits – whatever the cause, the gold price plunged to 1,270 US$/ounce on Tuesday evening and has since failed to rebound. The weekly low was reached yesterday evening at 1,250 US$/ounce. Last night and this morning, we saw buying activity in gold, most likely because investors are seeking safe havens, resulting in slight recovery: gold currently trades at 1,256 US$/ounce.

In addition to the extremely weak Indian import data, gold is also feeling the strain of increased expectations for a Fed interest rate hike in December, which in turn caused the US dollar to rise against the euro, yen and a number of commodities currencies during the course of the week. The gold price would be able to profit from weak labour market data, expected to be published in the US this afternoon, as well as the looming US presidential election, with the next TV debate between Clinton and Trump coming up on Sunday.

Xetra-Gold showed a similar performance this week, its losses only slightly buffered by a weaker euro. From 37.95 €/gram exactly a week ago, it fell to 36.05 €/gram yesterday and currently trades for approximately 36.30 €/gram.

A less than solid start into the new quarter, but no reason to despair. To all readers: have a very happy, cosy autumn weekend.

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