Gold in a phase of consolidation?

Due to the Euro League win by the local football team, most Frankfurt residents today are likely wearing the team’s colours as well as a big grin on their faces. Congratulations to the heroes of Seville! For stock market investors, the past week has been less ideal, and gold prices also gave a bit of a scare, at least in the short term. 

The focus remains on the high inflation rates (Great Britain reported a 9.0 per cent inflation increase this week) and the central banks’ reactions. As a result, yields on government bonds resurged mid-week. The fact that high inflation rates are also gradually eating into and weighing down the economy was demonstrated this week by a number of US retail companies’ profit warnings. They are observing a certain reluctance in consumer spending. As a result, US equity markets went on a mid-week slide, causing some indices to suffer their biggest daily loss since October 2020.

US dollar slips over the course of the week

The plunge in US indices slowed the upward movement of yields as government bonds were sought as safe havens, causing their prices to rise and yields to fall conversely. While the gold price had previously suffered from the rise in yields, it has thus far benefited from the burgeoning risk aversion dominating the markets in the second half of the week. In addition, the euro was supported by the week’s US dollar decline. For the first time in several weeks, it could close the week weaker than it started.

The gold price stood at 1,826 US$ per ounce on Friday morning last week, then dipped briefly at the beginning of this week to 1,787, but recovered back to its starting level within a few hours. Yesterday afternoon, gold was in demand as a safe haven and climbed to 1,849. This morning at 8:00, gold traded marginally lower at 1,846.

Xetra-Gold slightly down

Due to the firmer euro, the Xetra-Gold price did not follow this upward movement. While Xetra-Gold traded at 56.50 € per gram on Friday, it plunged to 55.20 on Monday. The subsequent recovery saw it rise to 56.20 within regular trading yesterday (Thursday). This morning, Xetra gold (as of 8:00) should be trading around 56.10.

Gold prices will remain under the influence of yield developments and the US dollar exchange rate. Next week will see the publication of various data that could shed light on the economic development of the US and the Eurozone.

I wish all readers a happy and relaxing weekend.