Geopolitical risks

No sooner had we published last week’s news update than the geopolitical risks we had mentioned shortly before began to manifest. Tensions in the Middle East escalated, and fighting between Israel and Iran continued with mutual attacks until this morning. The big question on the financial markets – apart from the humanitarian suffering caused by the situation – is whether the situation will escalate further, for example with the US intervening in the fighting, and whether this could have an impact on oil supply from the Middle East. On Friday, the financial markets remained highly risk-averse, with oil prices intermittently rising 13 per cent. Monday saw them fall back slightly before rising again yesterday evening – a constant up and down, depending on the news.

Slight rise in gold prices

Last Thursday morning, gold traded at 3,375 US$ per ounce. Due to the escalation in the Middle East, it jumped to 3,451 at the start of trading on Monday. With risk appetite returning to the financial markets on Monday, it dropped back to 3,385 per ounce that evening and has since been trading sideways between 3,375 and 3,400 US$ per ounce, kicking off today’s trading day at around 3,385.

The Xetra-Gold price also rose moderately, initially from 94.10 € per gram last Thursday morning to 96.30 on Friday afternoon, then weakening on Monday to 93.85 and 94.50 yesterday. Xetra-Gold is likely to start trading today at 94.40 € per gram.

Central banks expand gold reserves

In the medium term, the prospects for further price increases are likely to remain intact, as also indicated by a World Gold Council survey, according to which 43 per cent of the central banks surveyed intend to expand their gold holdings this year. This is the highest figure recorded since the annual survey launched eight years ago, with none of the central banks surveyed planning to reduce their gold reserves in 2025. Among the 73 central banks taking part in the survey, just under three-quarters expect global holdings of US dollars in national reserves to decline over the next five years.

In the coming days, the markets will continue to closely watch geopolitical developments as well as various central bank meetings, primarily that of the US Federal Reserve this evening.

I wish all readers a pleasant weekend, and for those who can look forward to a bank holiday tomorrow, perhaps even a long weekend.