Gold advances as US-Chinese trade conflict intensifies

Market report Michael Blumenroth – 10.05.2019

Weekly market report

The escalating trade conflict has dominated the markets throughout the past week. After the markets had, somewhat surprisingly, looked upon the topic as solved, the US President placed the issue back on the agenda on Sunday. Frustrated by the slow progress towards a trade agreement, he raised tariffs to 25 per cent (from 10 per cent) on US$200 bn. worth of Chinese goods. Talks between US and Chinese officials are scheduled today to prevent further escalation. Uncertainty has reclaimed the markets, particularly noticeable on the stock markets, which in some cases saw quite a reversal from Monday to Thursday, while safe havens, i.e. government bonds and the yen, noted increased demand. The gold price also benefited from the turbulent overall market situation.

Gold in US dollars above US$1,280 level

On Thursday morning last week, gold traded at 1,272 $/ounce and steadily receded to 1,266.50$/ounce later that day, its lowest level to date in 2019. Let’s recall that on Wednesday evening, the Fed had disappointed investors who were hoping it might lower interest rates. Following Friday’s US labour market data (the rise in wages and salaries remained slightly below expectations), gold climbed back above the 1,280$/ounce mark. The resurging trade conflict then pushed the precious metal to its weekly high of 1,291.50 $/ounce on Wednesday. It currently trades slightly lower, at 1,285 $/ounce.

Xetra-Gold rises slightly

During the past week, the euro moved upward within a rather narrow trading range, after falling to 1.1140 €/$ last Friday (it currently stands at 1.1225 €/$). Xetra-Gold saw a slight rise over the course of the week. From 36.50 €/gram last Thursday morning, it had climbed to 37.10 €/gram by Wednesday, but then receded halfway and currently trades at 36.80 €/gram.

The markets are now hoping for white smoke from Washington regarding the US-Chinese trade talks. Amid this instability, one thing remains unchanged: the more uncertain the overall situation, one the more bounce in the step of the gold price. This afternoon, US consumer prices may also be on the agenda.

I wish all readers a restful weekend.

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