Consolidation at a very high level

Market report Michael Blumenroth – 28.03.2024

Weekly Market Report

Looking back at a largely relaxed pre-Easter week across the financial markets, it seems that market players have largely sailed off to their Easter vacations. By and large, the financial markets are lying in wait for the publication of the US inflation rate, the so-called PCE core rate, i.e. personal consumption expenditure adjusted for energy and food prices – an important Fed measure for policy decisions. Unfortunately, this data is scheduled for publication on Good Friday, when the markets in New York, London and Frankfurt will be closed. As Easter also marks the end of the quarter, traders have been more cautious this week than might have been expected.

Gold defies currency markets and government bond yields

On the currency markets, feelings ran high – at least temporarily, as the Chinese renminbi and the Japanese yen unexpectedly depreciated significantly. The yen even dipped to a 34-year low against the US dollar. This caused some uncertainty and increased demand for US dollars, the supposed safe haven currency. At the same time, government bond yields saw a slight rise at the start of the week, a development which usually has a dampening effect on the gold price. 
Nonetheless, the precious metal kept close to its previously set mark of 2,200 US$ per ounce over the course of the week and even traded somewhat higher in the short term. Last Thursday’s record high of 2,220 US$ per ounce, however, has remained out of reach thus far this week.  

Gold in US dollars stable week-on-week

Last Thursday morning, gold traded at 2,204 US$ per ounce. Over the course of the day and on Friday, rising yields and a firmer US dollar dampened its lustre to 2,157. During Holy Week, the yellow metal was able to recover to 2,200 with no decisive fundamental reason, except possibly an option expiry at the end of the month, but was unable to hold this level for long. A near miss occurred yesterday, and at the start of European trading this Thursday morning around 7:00, it clocked in at 2,198 US$ per ounce, almost the same level as last week.

Xetra-Gold sets another record

The Xetra-Gold price benefited from a weaker euro and made further gains yesterday evening. From a record high of 64.80 € per gram last Thursday morning, it initially weakened to 64.15 that afternoon. It rose sharply from Tuesday onwards, reaching a new record high of 65.20 yesterday afternoon. This morning, Xetra-Gold was expected to start trading at around 65.35 € per gram, which would mean another all-time high.

In addition to the above-mentioned core PCE rate, eurozone inflation data is on next week’s agenda. In addition, the markets are eagerly awaiting US labour market data, to be published next Friday, and the start of a new quarter. Whatever lies ahead – the fact that gold prices have held up so well this Holy Week is impressive.

I wish all readers a happy Easter weekend.

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