Demand for gold remains solid

Market report Michael Blumenroth – 15.02.2019

Weekly market report

The trading range for gold thus far this week has been narrow and comparable to last week. Although it has faced some headwind, the precious metal has stood its ground.

US dollar at annual high

The US dollar rose to a new high for 2019 against both the euro and the yen over the course of the week, and the US-Chinese trade conflict seems to be easing, although the situation is changing by the hour and we might see reliable news on the subject later today. The US budget dispute and the risk of a new government shutdown has been averted with the deal reached by the Senate and House of Representatives. These developments might have led to sales activity in “safe” assets.

US government bonds weaken

The gold price was, however, supported by the fact that, following yesterday’s publication of weak data on retail sales in the US, yields / market interest rates on US government bonds headed south. In other words: the lower, albeit safe, interest rates offered by Treasuries were no competition for gold.

Gold in US dollars in narrow trading range

In US dollars, gold traded at 1,309 $/ounce on Friday morning last week, and fluctuated slightly over the course of the week, all within a relatively narrow trading range. The weekly high on Wednesday afternoon was 1,318 $/ounce; the weekly low on Thursday afternoon 1,302.50 $/ounce. The precious metal thus remained soundly above the 1,300 $/ounce mark. This (Friday) morning, gold stood at a solid $1,315/ounce. 

Gold in euro at new 21-month high

This week, the euro came under some pressure against the US dollar, only briefly interrupted by a countermove following weak US retail sales figures yesterday. Thanks to the weaker euro, Xetra-Gold trades at a new 21-month high, having climbed from 37.05 €/gram last Friday morning to 37.50 €/gram on Wednesday afternoon. Thursday saw a brief setback, due to the stronger euro, to 37.20 €/gram, but regained ground and this morning sat calmly at the 37.50 €/gram mark.

A look at next week

The gold price will remain under the influence of the strong US dollar and weak yields. As Monday in the US is President’s Day, a holiday, we won’t see any market movement until Tuesday. A possible solution to the trade conflict remains important.

I wish all readers a relaxing weekend. 

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