Gold defends gains almost stoically

Market report Michael Blumenroth – 27.10.2023

Weekly market report

Market observers saw unusually extreme price volatility on the bond markets again this week, which had a knock-on effect on the other financial markets. The yields on US Treasuries initially surged upwards on Monday, with 10-year bonds exceeding the 5.0 percent mark for the first time since 2007, and 30-year bonds even topping 5.25 percent. However, this was set to change later in the day, after major investors voiced their expectation that yields must have almost peaked and would recede in the medium term. The bond markets remained uncommonly volatile for the remainder of the week. Just yesterday, the yield on 10-year Treasury Bonds scraped the 5-percent mark again. The daily bond market volatility is also likely to persist for the time being given the very high positions of speculative market players on the derivatives exchanges at present coupled with the geopolitical uncertainties.

The euro also benefitted briefly from the sharp temporary decline in US bond yields, climbing to almost 1.07 versus the US dollar before succumbing to gravity again and falling towards 1.05. It would not have been surprising to see more fluctuation in the gold price in this highly volatile environment, with equity markets remaining somewhat under pressure. However, the precious metal has been relatively unscathed. Gold still seems to be treated as a safe haven by some market players, so it has not been placed under much pressure even by the new cyclical yield peaks. 

Last Friday morning it still traded at USD 1,980 per ounce. The search for safe havens in the financial markets was apparently stepped up on Friday afternoon for fear of an escalation on the tense situation in the Middle East over the weekend. In addition to bonds and the Swiss franc, gold was also in demand, rising to USD 1,997 per ounce. Some of these positions were then liquidated at the beginning of this week. The price of gold fell to USD 1,954 per ounce on Tuesday afternoon, but has trended upwards since then, reaching USD 1,993 per ounce yesterday afternoon. It started trading not far from that figure this morning, at around USD 1,989 per ounce. 

The price of Xetra-Gold also remains stable and holds firm. Last Friday it started at EUR 60.15 per gram and increased to EUR 60.60 during normal trading hours. It declined in parallel to the USD gold price to a weekly low of EUR 59.10 per gram on Tuesday, before heading back up again to its weekly high of EUR 60.75 per gram at midday yesterday. It is expected to start trading at around EUR 60.55 per gram this morning.

Gold could remain in demand as a safe haven, although many market players are likely to be sufficiently positioned already. There may be some major events in next week's calendar with the US Fed meeting and the release of US labour market data. 

I wish all readers a pleasant weekend – especially in light of the extra hour's sleep on Sunday morning!

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