Gold price defies strong US dollar

Market report Michael Blumenroth – 11.05.2018

Weekly market report

Once again, the US dollar surprised us all with a seemingly unstoppable rise to new annual highs against nearly all other currencies; among them the euro. On the other hand, emerging countries’ currencies such as the Argentinian peso and the Turkish lira tumbled to new all-time lows. Yesterday afternoon however, the US dollar was slowed down by US consumer price data, which remained slightly below expectations.

Oil prices at record level

A further highlight of the week was the unstoppable rise of the oil prices, to their highest level since December 2014. A boosting influence of course was the decision announced by the US president to revive the Iran sanctions. Among market observers, a higher oil price raises the question at what point it will have an impact on inflation rates. 

The latter could come to support the gold price, which has held up surprisingly well during the course of the week, especially keeping in mind that the US dollar, as mentioned, reached new annual highs, and returns on ten-year US treasury bonds again spiked above the 3 per cent mark on Wednesday.

The gold price in US dollar and euro

Last week Thursday, gold traded at 1,310 $/ounce and restlessly moved within a trade margin of approximately $15 throughout the following days. The precious metal reached its weekly low on Wednesday at 1,304.50 $/ounce and its weekly high yesterday following the publication of US consumer price data, at 1,322.75 $/ounce. At currently 1,320 $/ounce, we thus remain near the high.

In euro, the gold price was therefore significantly stronger, again rising above the 1,100 €/ounce mark and to new annual highs. From 35.12 €/gram last Thursday morning, the price of Xetra-Gold rose continuously (also due to the development of the euro, which continued to slump until yesterday) to 35.70 €/gram yesterday afternoon. This morning it trades at 35.66 €/gram.

Multiple factors influence development

The next days will see the gold price continue to consider the direction of the US dollar, returns and oil prices in its own development. Geopolitical factors such as the Middle East conflict are also likely to influence pricing.

I wish all our readers a relaxing weekend.

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