Gold in euro reaches annual high

Market report Michael Blumenroth – 25.05.2018

Wöchentlicher Marktbericht

The now ending week has seen its share of political unrest, causing many investors to seek refuge in supposedly safe investments. The ongoing Italian government formation is making investors nervous as the involved parties’ plans entail an enormous expansion of national debt, which is in turn likely to cause conflict with Italy’s European partners due to the country’s already high debt ratio. Additional worries were caused by the Turkish lira which had plummeted to record lows a number of times throughout the week. 

With trade conflicts looming, gold price rises

Across the Atlantic, the US also transmitted signals scaring off investors. The US president is openly threatening to impose tariffs of 25 per cent on imported cars, which, in addition to Mexico and Japan, will hit European automakers especially hard. The trade conflict between the US and China is also smoldering, and Trump yesterday canceled his planned summit with North Korea’s Kim Jong Un. Until yesterday afternoon, the gold price had been more or less sluggish, these developments caused a rise above the 1,300 $/ounce mark. At the start of the week, the firmer US dollar had kept the gold price in check.

Gold price climbs upward in both US dollar and euro

Exactly a week ago, gold traded at 1,290 $/ounce and reached a weekly low of 1,282 $/ounce on Monday. By Thursday afternoon, however, it had steadily climbed upward to 1,295 $/ounce. Following Trump’s cancellation of the summit, the gold price spiked to 1,306.50 $/ounce. At currently 1,304 $/ounce, it remains close to that level.

In Euro, the gold price has also seen an increase, additionally benefitting from the fact that the euro against the Us dollar has dropped to its lowest levels since November 2017. From 35.10 €/gram last Friday morning, Xetra-Gold almost continuously climbed to its current 35.83 €/gram or 1,115 €/ounce, a weekly gain of almost exactly two per cent.

Further development depends on multiple factors

The gold price will continue to be influenced by (geo-)political hotspots, as well as US Treasury bond yields which declined this week, and the current US dollar strength.

I wish all our readers a pleasant weekend. 

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