Gold price at its highest level since March 2014 (and since March 2013 in euro)

Market report Michael Blumenroth – 08.07.2016

Weekly market report

Precious metals continue to be en vogue. At the beginning of last week, the gold price hardly moved and clung to its 1,320 US$/ounce mark, but finally started to slowly climb towards 1,340 US$/ounce on Friday. This increase was especially remarkable since the stock markets had calmed down, at least slightly, by the middle of the week, and the Brexit hysterics had somewhat subsided. On Monday – a holiday in the US – silver stole the show: traded below 18 US$/ounce mid-week, it jumped to 21 US$/ounce in view of illiquid Asian markets. The gold price did not quite follow suit but rose to 1,350 US$/ounce and reached its highest price since March 2014 at 1,375 US$/ounce on Wednesday, when silver was already slightly retreating. This was certainly mainly due to the continuing uncertainty regarding the implications of the Brexit referendum. In addition, the European stock markets experienced significant losses throughout the first three days of the current week, causing investors to seek safe havens. The gold price was further boosted by the continuing collapse of government bonds, with record lows for ten-year government bonds in, amongst others, the US, Germany, Japan and Great Britain. Worldwide, government bonds were valued at just under €10 trillion with negative returns. All of this, of course, makes for an almost perfect environment for gold. In addition, the currencies of a number of gold producing countries rose in value against the US dollar, also serving to support the gold price. Yesterday, we saw some profit taking – especially in silver, but also gold, which remains stable at currently 1,356 US$/ounce, an increase by 3.3 per cent since last week Wednesday. 

Investors in Xetra-Gold were also able to profit from the precious metal’s price increase. Traded at 38.45 €/gram last week Wednesday, it rose to 40€/gram on Wednesday of this week – its highest price since March 2013. It did recede to 39.90 €/gram yesterday and remained there until trading resumed this morning. But please allow me to remind you: we started the year at 31.35 €/gram.  

Today, the markets eagerly await US employment market data which could have an effect on the markets’ evaluation regarding US monetary policy (the next interest rate increase is currently expected for March 2019). Furthermore, the British EU referendum and its effects will remain the most important issue.

I wish you all a relaxing summer weekend and to my German readers: I hope everyone quickly gets over the frustration of yesterday’s defeat by the French football team!

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