Gold holds its ground in spite of firm US dollar

Market report Michael Blumenroth – 15.02.2017

Weekly market report

As already announced last week, my commentary comes early this week. Next week, you will have to do without it entirely, but I look forward to being back to business as usual on 3 March.

The current week has seen a sideward movement on the gold market, which is not a bad result at all, considering the once again rising returns, especially in the US and the firmer US dollar against the G10 currencies.

The main news of the week until now has been Janet Yellen’s testimony before the US Senate Banking Committee on Tuesday. Market observers had hoped for an indication that the Fed would already decide in favour of an interest rate hike in March. As usual, Yellen remained vague on the subject, with most analysts interpreting her statements to mean that she would rather increase interest rates too early than too late and thereby remain able to make adjustments into the opposite direction in the case of another recession.

As already indicated, this led to increasing US government bond returns and a firmer US dollar against the industrial countries’ currencies (quite remarkably, the developing countries’ currencies were able to strengthen against the greenback). This slowed down yesterday’s gold price development, just when the precious metal had seemed to be upward bound. Traded at 1,223 US$/ounce last Friday morning and at 1,237 US$/ounce on Friday evening, it fell to its weekly low of 1,219.50 US$/ounce directly on Monday. On Tuesday, it rebounded to 1,234 US$/ounce right before again being thwarted by Yellen. Gold currently trades at 1,226 US$/ounce, which is above last week’s price by a full US$3, in spite of the headwind caused by bond, stock and currency markets.

Eurozone investors benefited from the slightly weakening price of our joint currency. From 36.95 €/gram last Friday, the price of Xetra-Gold climbed to its weekly high of 37.40 €/gram. As the euro lost further ground this morning, Xetra-Gold currently again trades at 37.40 €/gram.

This afternoon will see the publication of a number of important economic data (among them consumer price data) from the US. For market observers, the implications of the new US government’s policy for the economy remain a central concern, as does the question of whether or not the Fed will decide for or against an interest rate increase in March (currently not expected).

I wish all of our readers all the best until my return on 3 March for my next commentary.  

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