Central bank week has little effect on gold

Market report Michael Blumenroth – 20.09.2019

Weekly market report

Market participants anxiously waited for the Fed meeting on Wednesday, with many analysts hoping for clear statements from representatives that the US central bank would continue on the path of interest rate cuts. Although the Fed did lower rates by 25 basis points as expected, it did not make any clear statements regarding further monetary policy measures in the future. On the contrary, the Fed’s forecasts currently point to unchanged key interest rates until the end of 2020. But that’s only the arithmetic mean – only a small minority is currently actually predicting a further rate cut for 2019.

Global key interest rates on downward course

The central banks of Japan, Switzerland, Great Britain, Norway, Brazil, etc. also met over the course of the week. Some new monetary policy measures were implemented, others were hinted at. Most are possible rate cuts (only Norway slightly raised the key rate this week, but announced that this increase was the final one). Generally speaking, money still seems to be getting cheaper in terms of global interest rates.

Oil attacks initially drive investors to seek safe havens

The week’s second cause for agitation was the attack on Saudi Arabia’s oil refineries last Saturday. When the trading week kicked off between Sunday and Monday, the markets saw a buying frenzy for oil futures, with the price of Brent rising almost 20 per cent before traders calmed back down over the course of the day. As expected, gold benefited as a safe haven from the original movements in the oil markets.

Gold holds its ground above US$1,500 mark

In US dollars, gold traded around 1,500 $/ounce on Friday morning last week. It receded to 1,485 $/ounce by the end of the week, but then climbed to 1,512 $/ounce on Monday morning due to the oil prices. After the oil situation had calmed down somewhat, the precious metal fluctuated between 1,495 and 1,505 $/ounce until Wednesday evening. Just before the start of the Fed meeting, gold again stood at 1,511 $/ounce and fell to its weekly low of 1,483.50 $/ounce immediately after the meeting (a reminder: Fed representatives expect no further rate cuts until the end of 2020). On Thursday and this morning, the markets came to realise that the Fed’s statements were not set in stone. US yields receded slightly and gold rebounded, currently trading around 1,505 $/ounce.

Gold in euro rises slightly week on week

This week, the euro once again traded against the US dollar in a very narrow trading range, and the exchange rate impact on Xetra-Gold thus remains small. From 43.70 €/gram on Friday morning last week and 43.30 €/gram on Friday evening, Xetra-Gold had climbed to around 44.00 €/gram by Monday evening. With the somewhat weaker gold price in US dollars and the fact that demand for safe havens lessened over the course of the week, the price of Xetra-Gold also receded and started trading this morning at around 43.75 €/gram.

Next week, the US-China trade conflict is likely to gradually come to the fore again. Until then, I wish all readers a restful late summer weekend.

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