Gold price slows

Market report Michael Blumenroth – 08.09.2023

Weekly Market Report

In trader and analyst jargon, it’s “back to school” once the summer break is over (despite the current temperatures) and after Labor Day in the US on the first Monday in September, when everyone has dutifully returned to the (home) office. It is usually also a starting signal for market participants to get into gear for (golden?) autumn.

Oil prices and US dollar soar

We saw this week’s most conspicuous movement, apart from the oil markets – where prices rose to an eleven-month high, much to the dismay of motorists – on the currency markets, where only one currency was in demand, the US dollar. US economic data has recently been much better than across most other regions, causing uncertainty in the financial markets and boosting the US dollar as a (supposedly) safe haven.

This development is just as detrimental to the gold price as the fact that the interest rate futures markets have again priced in a somewhat higher probability of a final interest rate hike by the Fed over the course of the week and pushed back speculations on the first interest rate cuts. In the middle of the week, a key interest rate of 4.45 per cent had been priced in for December 2024, making for a long-term high interest rate level (which we are currently about one percentage point above).

Several factors weigh on gold in US dollars

A strong US dollar renders gold more expensive outside the US, while high interest rates or yields make fixed-interest investments more attractive. All of this did not exactly add up to boost gold prices. In view of the fact that the currencies of major gold-demanding Asian countries in particular came under considerable pressure over the course of the week, gold prices held up quite well.

Last Friday, gold traded at 1,942 US$ per ounce. After the publication of rather conspicuous US labor market data, it briefly jumped to 1,953 but closed the week at 1,940. Following the US bank holiday on Monday, a downturn had sent it to 1,915 by Wednesday. The gold price then fought its way back up to 1,927 and started the European trading day this morning at around 1,925.

Xetra-Gold temporarily above previous week’s level

The Xetra-Gold price was supported by the depreciation of the euro against the US dollar and thus even traded mostly above last week’s level. From 57.55 € per gram last Friday, it started the new week at its weekly high of 57.95 on Monday. It then weakened only slightly to 57.50 on Wednesday and was expected to start trading this morning at a somewhat firmer 57.75.

Developments on the currency markets are likely to hold excitement in the coming days, especially in view of August US consumer price data and the ECB meeting scheduled for next week. Unfortunately, I will be unable to provide a written commentary for the next two weeks. We will, however, be shooting a new video commodity report (in German) immediately following the Fed meeting, which will provide an overview of the unfolding events.

I wish all our readers a great late summer weekend, perhaps with a dip in the lake or a barbecue ...

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