Gold in a sideways movement with a slight upward trend

Market report Michael Blumenroth – 22.03.2019

Weekly market report

Surprisingly, since the publication of our last commentary two weeks ago, most markets have remained predominantly calm. This was especially true for currencies. To date, the euro/US dollar exchange rate has moved within an extremely narrow trading range (a range similarly narrow was last observed in 1999).

Market observers do not expect any further interest rate hikes

The markets for government bonds were similarly uneventful. The yields/market interest rates of US or German government bonds remained largely immobile. This is certainly due to the fact that for the time being, no further interest rate cuts by the central banks are expected for both the eurozone and the US, making any changes in the near future seem unlikely.

Lethargic raw materials

A number of raw materials (including copper) were infected by this lethargy. Although palladium prices did move above 1,600 $/ounce, gold prices have been more laid back.

Fed hits the brakes

The Fed surprised markets on Wednesday evening by throwing its 2019 forecast completely overboard when it announced that further rate hikes were not to be expected anytime soon. Most market participants had anticipated a somewhat less cautious Fed outlook, with the US dollar losing some ground on Wednesday evening and Thursday morning. Conversely, the price of gold rose.

Gold in US dollars and euros 

The precious metal traded at 1,293 $/ounce on Friday morning last week. It then briefly rose just above the 1,310 $/ounce mark on both the 13 and 19 March. After the Fed meeting, gold climbed to 1,320 $/ounce, but fell slightly when the US dollar recovered. It currently trades at 1,311 $/ounce.

Following the ECB meeting, the euro traded at a 22-month low of 1.1177 against the US dollar two weeks ago and slowly climbed to reach 1.1437, having previously lingered around 1.1350. The recovery of the euro went hand in hand with that of gold. There have thus been no dramatic movements in the gold/euro exchange rate.

Xetra-Gold lingers near 37 €/gram mark

The price of Xetra-Gold also fell from 37.10 €/gram Friday morning two weeks ago to 37.25 €/gram on 13 March. Only one day later, Xetra-Gold dropped to the daily low of 36.80 €/gram due to the firmer euro. After that, it stayed near the 37 €/gram mark. On Wednesday and Thursday, it rose to 37.20 €/gram and currently stands slightly lower, at around 37.10 €/gram.

Trade dispute and Brexit continue to dominate

Following the Fed meeting, market participants are taking a more relaxed approach towards the further development of the trade conflict between the US and China. Depending on the outcome, the endless Brexit deliberations could however keep the markets on their toes.

I wish all readers a pleasant spring weekend.

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