First weekly loss since May?

Market report Michael Blumenroth – 15.07.2016

Weekly market report

Following weeks of steady uptrend and even though the beginning of the week seemed promising, gold is likely to close the current week at a lower price. While it was traded at 1,356 US$/ounce exactly a week ago, it climbed to a new two-and-a-half year high on Monday night at 1,375 US$/ounce amid low trading volumes. This happened without any apparent logical reason, except for the fact that the result of the election of the Members of the Japanese House of Councillors provided a clear majority for the ruling coalition, fuelling expectations for new fiscal policy measures in the country. In other words: more yen are likely flow into Japan’s economy, part of which might well be invested in gold. This came to the benefit of the gold price, but was overshadowed by the fact that the stock markets took the results of the Japanese vote and the quick decision about David Cameron’s succession as a starting signal for an impressive rally. The Japanese Nikkei Index rose by 9 per cent, and in the US, the Dow Jones and S&P 500 have risen to new record highs since Tuesday. In Germany, the DAX was able to again reach the 10,000 point mark during the course of the week. All this means that in spite of the Brexit and uncertain global economy, the markets were more risk-tolerant, in turn usually resulting in the termination of positions in safe havens, i.e. in Yen, Swiss francs and gold. Accordingly, the Yen fell by 5 per cent during the course of the week, the Swiss franc also experienced mild losses and the gold price reflected the trend. Traded at 1,375 US$/ounce the night before Monday, it had fallen to 1,355 US$/ounce by Monday evening. From there, among extreme volatility, the precious metal reached its weekly low on Thursday afternoon at 1,321 US$/ounce. This morning, it had steadied at 1,332 US$/ounce, thanks in part to the Chinese GDP and industrial performance data published last night, which is above analysts’ expectations and likely to bolster the demand for gold. Should we see a weekly loss for the gold price, it would be the first since the month of May.

Xetra-Gold is also trading at a lower price than last Friday. Exactly a week ago, it stood at 39.30 €/gram and reached its weekly high on Monday at 39.75 €/gram. Since then, it has steadily fallen to approximately 38.50 €/gram this morning.

This afternoon, we will see a flood of economic data from the US which could impact the US dollar and thereby indirectly affect the gold price. The markets should, however, soon enter summer mode.

I wish you all a sunny weekend and to those of you packing for their summer holiday: have a safe and happy vacation.

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