Consolidation

Welcome to the second half of the year, and let’s see what it has in store for us. Looking back at the first year-half, fans of precious metals will have little reason to complain. Although platinum slightly outperformed gold with an enormous final spurt and a 47 percent increase over the first six months, there is likely little dissatisfaction with the roughly 25 percent gold price gain in US dollars. This put the yellow metal just ahead of silver, and even the long-spurned palladium saw impressive gains thanks to a strong month of June.

Although gold prices came under moderate pressure at the end of the month and half-year – possibly due to profit-taking or a shift from gold investments to platinum – they got off to a strong start in the second half of the year. The record highs of the S&P 500 in the US signal an appetite for risk and a tendency towards complacency on the markets, which is dampening the allure of gold as a safe haven.

Medium-term investors seem to remain committed to gold because:

• The US tax bill, dubbed ‘One Big Beautiful Bill’ by US President Trump, is facing what may be its final vote in the US House of Representatives. If implemented as currently planned, it is likely to increase US government debt by around US$3.4 trillion by 2034, according to independent observers.
• Growing government debt will keep many investors interested in gold. Here in Germany, increased borrowing is also planned for the coming years. In the UK, yields on British government bonds rose significantly yesterday, following media speculation that the current Chancellor of the Exchequer, Rachel Reeves, could be replaced, which from a market perspective could lead to a loosening UK fiscal policy (i.e. even higher government debt).
• The end of the tariff pause on 9 July is fast approaching. If the countries affected do not reach trade agreements with the US by then, the higher US tariffs announced on 2 July could come fully into force. This could cause turmoil on the capital markets next week.

Added to this is growing speculation that the Fed might cut key interest rates in September at the latest. This weighed on the US dollar, resulting in the euro trading above US$1.18 for the first time since September 2021.

This gave gold prices a boost:

Last Thursday morning, gold traded at 3,335 US$ per ounce, dropped to 3,249 on Monday morning 30 June and recovered to 3,305 by the end of the day. For the start of the new half-year, it rose to 3,365 last night and started today’s trading at roughly 3,360 US$ per ounce.

The Xetra-Gold price was held back by the further appreciation of the euro against the US dollar, initially rising from 91.85 € per gram last Thursday morning to 89.30 on Friday. It then rebounded and reached 91.60 yesterday. If the price holds until the start of trading, Xetra-Gold is likely to kick off today’s trading at around 91.60 € per gram.

The focus should remain on the US tax package and customs policy and markets will also closely watch out for US labor market data, scheduled for publication this afternoon due to tomorrow’s Fourth of July holiday.

I wish all readers more pleasant temperatures than yesterday and, for those heading towards their summer break, a happy start to their vacation.