Gold fails to clear technical hurdle

Market report Michael Blumenroth – 12.04.2018

Weekly market report

Due to the “Invest” fair in Stuttgart, I am writing this market report on the Thursday.

Almost, just almost, I could have written about a new annual high for gold. However, a technical hurdle – something I don’t really believe in as such – proved hard to clear as of the time of my writing: The 1,365 US$/ounce level, which the precious metal failed to rise above several times in the past months, again put an end to the advance.

Gold impacted by geopolitics and US monetary policy 

That said, gold had a really good day on Wednesday. This was due to increasing concern the situation in the Middle East may escalate, recently spurred by Donald Trump’s rather nonchalant tweets. In the wake of this, both gold and oil saw further gains, with crude rising to the highest level since the end of 2014. Gold was initially supported by the slightly weaker US dollar. However, on Wednesday night, the US currency strengthened after the Fed minutes indicated further interest rate hikes in the coming months. This put a damper on the precious metal’s advance. What is quite remarkable is gold’s strength at the beginning of the week, despite an apparent easing of the trade conflict between the US and China.       

A closer look at gold’s performance this week 

Let’s look at developments in actual numbers. Last Friday, gold traded at 1,326 US$/ounce – even reaching an intraday low of 1,320 US$/ounce – before climbing to 1,340 US$/ounce on Tuesday evening. Following Trump’s Syria tweets on Wednesday, gold jumped to the above-mentioned hurdle of 1,365 US$/ounce, before retreating back to 1,348 US$/ounce by the evening. At the time of my writing, the precious metal traded at 1,351 US$/ounce, for a gain of around 2 per cent over the week so far. 

In euros, gold was also higher, despite the currency gaining during the week. From 34.85 €/gram last Friday, Xetra-Gold rose to 35.45 €/gram on Wednesday afternoon. It has since declined to 35.10 €/gram, currently trading at around 35.15 €/gram.

Over the next few days, geopolitical factors – particularly the developments around Syria – are likely to impact markets.

I wish you all a relaxing and sunny weekend. 

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