Euro soars to highest level in 2 ½ years while gold trading remains calm

During the past fortnight, gold prices in US dollar have continuously traded slightly higher, mainly due to the further weakening US dollar. The Fed had reaffirmed its intention for an extremely slow exit from expansive monetary policy, which in turn caused market participants to deem another interest rate hike for 2017 increasingly unlikely. In addition, the US government seems unable to move forward in its plans on tax reform and infrastructure measures, driving disappointed major investors to abandon their US dollar positions. Following favourable euro zone economic data, the euro, on the other hand, remains the current darling of the investment community. For the first time since January 2015, it soared to 1.19 against the US dollar and to 1.15 against the Swiss Franc.

A weak US dollar and a tendency towards falling market interest rates in the US caused the gold price in US dollars to rise. Two weeks ago, when our last market report was published, gold traded at 1,248 US$/ounce and then continuously climbed – especially following the Fed meeting – to its current weekly high of 1,274 US$/ounce this past Tuesday and now trades at a slightly lover 1,269 US$/ounce, in a calm trading environment.

The rise of the euro against the US dollar by nearly 3 cent within the past two weeks of course somewhat slowed down the price of Xetra-Gold. From 34.45 €/gram on Friday two weeks ago, it climbed to a high of 34.80 €/gram at the beginning of this week. With a further rise of the euro, however, the price of Xetra-Gold has dropped to its current 34.40 €/gram. 

This afternoon, we will see the publication of US labour market data. Economists expect wage development to indicate the direction of US inflation (alongside the Fed’s future monetary policy).The decisive question, however, will also be whether the US dollar is currently oversold and therefore likely to slightly recover – just like the US President, who is going on a two-week vacation following the recent turbulences.

I wish all our readers a calm summer weekend.