Gold nears the USD 2,050 mark

The price of gold climbed again in the post-Easter trading week, facing at least some headwind from global yields, which have been moving up since Good Friday. Yields had been on the decline until last Thursday, but the US jobs report published on Good Friday put fresh wind their sails. The US unemployment rate dropped unexpectedly to 3.5%, bringing it close to the 54-year low posted in January. The US also saw slightly more new jobs created than analysts had previously anticipated. 

Consumer price data for the USA was this week’s data highlight. Inflation fell from 6.0% in February to 5.0% in March, slightly below what analysts had forecast. Core inflation (excluding energy and food prices) continued to grow to 5.6%, unsurprisingly. It seems, however, that the markets focused on the drop in headline inflation, pricing in less restrictive US Fed monetary policy for the second half of 2023, or in other words, somewhat heftier rate cuts. 

While an increasing number of Fed officials favour a break in rate hikes in the near future, or even ending the rate hike cycle soon, some ECB Governing Council members indicated during the week that the ECB still has a few more rate hikes in store. The subsequent rise in yields on Eurozone government bonds posed no hindrance to the rally in gold prices. On the contrary, the precious metal benefited from the US dollar’s weakening trend through the week (due to Fed rate cut expectations) – hitting a one-year high yesterday. Although it was still trading at USD 2,014 per ounce on Maundy Thursday morning, the gold price dropped initially to a weekly low of USD 1,982 per ounce on Easter Monday, in the wake of the US labour market data that went out on Good Friday. Gold moved back up to the USD 2,000 per ounce mark on Tuesday, rising sharply to USD 2,048.50 per ounce by yesterday afternoon. This morning, gold prices are trading slightly lower – around USD 2,041 per ounce at 8.00 a.m. 

The Xetra-Gold price was held back somewhat by the euro’s strong appreciation against the US dollar during normal trading hours; price moves were not very clear either. Last week, Xetra Gold was still trading at EUR 59.40 per gram on Thursday morning, but by this Wednesday afternoon it had fallen to EUR 58.60 per gram. Yesterday, it climbed back up to EUR 59.50 per gram; this morning, Xetra-Gold was expected to start trading at around EUR 59.30 per gram. 

We will likely see central banks’ monetary policy directions, government bond yields and the US dollar continuing to hold sway over gold prices.  

I wish all readers a pleasant spring weekend.