Gold consolidates

The week has been dominated by the Russia-Ukraine war and the meeting of the US Federal Reserve. By midweek, many market participants had grown hopeful for a diplomatic solution to the armed conflict in Ukraine, but were again slightly discouraged yesterday by statements from Russia. Although the depressing events in Ukraine continue to overshadow the markets, positions in supposedly safe havens such as the Swiss franc, the Japanese yen, government bonds and gold were sold over the course of the week.

Higher yields on government bonds

As expected, the Fed raised its key interest rates on Wednesday by 0.25 percentage points for the first time since December 2018. Looking ahead, the monetary guardians are planning six more identical rate hikes by the end of the year and three to four more in 2023, which would place the key interest rate at around 2.80 per cent, where it should remain into 2024. While it is impossible to predict economic and geopolitical developments that far into the future, the Fed and the markets are now in line in terms of expectations. Capital market interest rates, or government bond yields, rose significantly during the week. In both the US and Germany, they are now slightly above pre-pandemic levels, which weighed on the gold price. Inflation concerns, on the other hand, continue to provide tailwind for the precious metal.

Gold prices lose slightly week on week

Gold traded at 1,990 US$ per ounce last Friday morning. It has since weakened in light of hopes for a diplomatic solution to the Russia-Ukraine war and retreated to 1,895 immediately following the Fed meeting. With oil prices rebounding and little tangible progress on a ceasefire in Ukraine, the yellow metal climbed back to 1,950 yesterday afternoon. This morning, it traded at 1,932.

The Xetra-Gold price also slipped week-on-week from 58.25 € per gram at the end of last week to 55.50 on Wednesday. Recovering back to 56.70 yesterday afternoon, it was expected to start trading this morning at around 56.25.

Next week, the geopolitical situation and price movements across energy commodity markets are likely to dominate the markets.

I wish all readers a peaceful spring weekend.