Gold lying in wait

Market report Michael Blumenroth – 17.01.2019

Weekly market report

Since the last gold market commentary was published on 4 January, we have seen relatively minor price changes for gold. Please note that this report was written on the evening of 16 January and things might have changed in the meantime.

Gold attractive amid shutdown and Brexit

Other markets have experienced more movement, with the stock market getting off to a good start to the New Year. The steady gold prices are a good sign – a number of positions had certainly been acquired to hedge other investments as safe havens and meanwhile might have been liquidated. The mood on the oil markets seems less pessimistic than at the end of 2018. The (geo-) political risks, however, are still very real, especially obvious this week with the trials and tribulations surrounding Brexit. Italian and Greek debt issues are also back on the news radar, which is, however, dominated by the record-breaking US government shutdown. This may encourage some investors to believe that it would not be wrong to add some gold to their portfolio as collateral, especially since hopes of interest rate hikes in both the US and Europe remain at a low level.

Price in US dollars stable

Gold traded at 1,294 $/ounce on Friday morning last week. It dropped to 1,277 $/ounce in the afternoon but had recovered to 1,295 $/ounce by Monday 7 January. It has since traded in a sideways range of 1,280 $/ounce and 1,297 $/ounce and currently remains near that level at 1,293 $/ounce. 

Similar development in euro

The euro also traded mostly in a well-defined range against the US dollar, between 1.13 and 1.15, in the middle of which it currently remains. The price of Xetra-Gold thus initially fell from 36.50 €/gram last Friday morning to 35.95 €/gram on Wednesday, 9 January. Since then it has rebounded quite steadily and almost returned to its starting level. As I was writing these lines, it traded at 36.45 €/gram, i.e. close to its highest price since June 2017.

Markets still under the influence of Britain and the US

In determining the gold price, the markets will likely also take into account movements on the stock markets as well as the development of market interest rates in the US. The further development of events surrounding Brexit could lead to either significant volatility or a more relaxed market situation (the latter in the case a 'Soft Brexit' approval).

I wish all readers a happy and relaxing weekend.

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