Brightening prospects for gold?

Market report Michael Blumenroth – 08.09.2016

Weekly market report

As announced, this week’s commentary arrives a day early. I do, however, hope that the gold price remains stable until the end of the week tomorrow, which would mean that following two weeks of rather restrained price movements for gold, this week would close seeing a solid profit.

As did the other precious metals, gold also profited from the fact that poor US economic data led to a pricing out of the Fed interest rate increase, expected by a number of market participants as early as 21 September. The basic rule: The lower the US key interest rate, the higher the price of gold. 

Last Thursday’s warning shot, that is the dismal ISM index (a survey of supply and purchasing managers, usually a sound indicator for the economic development of the next months) died away unheard. The publication of US employment data last Friday, however, served as a wakeup call, turning out slightly weaker than expected by the majority of market participants.

Before publication of the US employment market data, gold traded at 1,305 US$/ounce and closed the week at 1,325 US$/ounce. Following the slow start of the week in the US due to Labor Day, Tuesday’s ISM index publication came as a shock regarding US economic data, with the most dramatic recession since November 2008, i.e. the weakest data in six years. After it had climbed significantly by Friday evening, the US dollar weakened. Precious metals, on the other hand, took off. The gold price rose to 1,352.50 US$/ounce and currently trades at 1,347 US$/ounce. 

The US dollar has experienced a setback against the euro, but it has nevertheless been a good week for Xetra-Gold investors. From 37.70 €/gram on Friday morning, it climbed to 38.65 €/gram at yesterday’s weekly high and currently trades at 38.50 €/gram.

The general mood across the markets is calm but tense, in anticipation of the next central bank meetings. The ECB meeting is scheduled today, the meetings of the Bank of England and Swiss National Bank will be held next Thursday and those of the Bank of Japan and the Fed will both be on 21 September. And the US presidential election is also coming into focus.

I wish all readers a beautiful and sunny late summer weekend.

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