Gold price continues to trade without clear direction

Market report Michael Blumenroth – 23.11.2018

Weekly market report

I noticed with some astonishment that after some ups and downs in US dollars, the gold price trades almost exactly where it was stood two weeks ago, when I wrote my last commentary. I would have blamed this on brain fog caused by the flu, but it seems to be correct after all.

A look into other markets

This comes as somewhat of a surprise, because we have seen a lot of movement in other markets. Oil prices have been falling continuously for seven weeks, so that Brent oil, for example, reached a new 2018 low this morning. This is one of the reasons why yields/market interest rates on government bonds in both the US and Europe have seen a downward trend, which in turn is likely to support the gold price. Similarly, many emerging market currencies recovered against the US dollar. And the stock markets seem to be postponing the usual year-end rally far back this year or even dropping it altogether.

Other precious metals currently in demand

All of this might – or even should – have lent a supporting hand to the gold price. The fact that palladium has risen to new all-time highs also shows that precious metals are indeed en vogue at the moment. The gold price might still be suffering from repercussions of the trade conflict between the US and China. In addition, the US dollar remains quite strong against most other currencies, especially those of the emerging markets. And the Fed seems to be set on continuing its path of interest rate hikes. 

Gold in US dollars weaker

In US dollars, gold traded at 1,224 $/ounce on Thursday morning last week. In the wake of the US dollar's strength immediately after the US Congressional elections, the gold price initially fell and tumbled to 1,197 $/ounce on Tuesday, 13 November. In the days that followed, it held its ground and was up to 1,230 $/ounce on Wednesday of this week, but has since receded and currently trades at 1,223 $/ounce. 

Mini-gain for gold in euro

The euro initially weakened against the US dollar after the Congressional elections, but has since been able to make up for a large part of its losses. This also impacted the gold price in euros. Xetra-Gold, which stood at 34.45 €/gram on Thursday morning, fell to 34.10 €/gram on 14 November, moved up to 34.65 €/gram on Wednesday afternoon of this week and stood at 34.55 €/gram this morning – a slight gain over the last two weeks.

Geopolitical situation remains important

At present, the markets will continue to focus more on political issues, more precisely the EU special summit on Brexit on Sunday and the meeting of the presidents of the US and China, scheduled to take place the following weekend, which might pave the way for a resolution of the trade conflict.

I wish all readers a relaxing weekend.  

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