Gold gets back on track

Market report Michael Blumenroth – 21.10.2016

Weekly market report

A relatively uneventful week regarding the development of the gold price is now almost over. Investors will have benefited from slightly rising prices, should the situation remain stable until tonight.

The week’s events were dominated by a stable US dollar. The DXY index, calculated by Reuters, which shows US dollar strength against a number of currencies, rose to its highest level since March of this year. One of the reasons is the further improving poll ratings for Hillary Clinton. According to FiveThirtyEight.com, the probability that Clinton will be the next US president is at present approximately 85 per cent, although this excludes the polling results following Thursday’s final TV debate. The market has, however, already spoken its verdict and expects no significant changes in the presidential race. We will have to wait and see.

The supposed economic highlight of the week was yesterday’s ECB meeting. Mario Draghi skilfully dodged any questions regarding a possible extension of the bond purchase programme. The markets deem an extension probable, and the euro accordingly has come under pressure.

The gold price has been surprisingly steadfast in the face of the rising US dollar. While it traded at 1,256 US$/ounce exactly a week ago, dipping down to 1,246 US$/ounce during the course of the day, it was able to recover to 1,274 US$/ounce yesterday afternoon. Unable to entirely ignore the strong US dollar, it took a downward turn yesterday evening to its current price of 1,265 US$/ounce.
The price of Xetra-Gold profited from the weakening of the euro against the US dollar throughout the week; from 36.36 €/gram last Friday and a daily low of 36.60 €/gram on Friday afternoon, it climbed to 37.50 €/gram yesterday and currently trades at 37.30 €/gram.

Looking at the larger picture, the markets are now focusing on the quarterly results of listed companies. Next week should see a focus on the European purchasing managers’ indices and the publication of a number of US economic data, including the first GDP estimates of the third quarter. All data with a potential influence of the Fed’s monetary policy should be of interest.

To all our readers, a wonderful weekend, with weather hopefully less turbulent than during the past few days. 

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