Gold price remains on upward trajectory

Market report Arnulf Hinkel, financial journalist – 20.01.2023

Weekly market report

Once again, gold investors are looking back at a successful week in trading, with the precious metal jumping to an eight-month high against the US dollar and a six-month high against the euro.

Gold prices slightly benefited from resurging recession fears, particularly regarding the US economy. Wednesday saw the publication of economic data significantly below the previous month’s numbers and expectations. As a result, yields on 10-year Treasuries dropped to their lowest level since September 2022, and yields on eurozone government bonds also came under pressure after a news agency reported that ECB officials were contemplating a reduction in the pace of key interest rate hikes starting in March, amid expectations of a significant lowering of inflation rates in the medium term.

Are rising yields clouding the gold price?

Lower yields usually benefit the gold price, especially when further supported by a weaker US dollar exchange rate. The latter remained under pressure over the course of the week, although at least on Wednesday it was in demand as a safe haven due to the significant setback across US stock markets. Despite a rise in yields yesterday, the gold price shot back up to new highs – wholly unexpected and counterintuitive to many investors.

While gold traded at 1,899 US$ per ounce on Friday morning last week, it closed the week at 1,921. The night before Wednesday, gold prices once again dropped below the 1,900 mark, but regained it only hours later. At 1,935, a new eight-month high was reached last night, and this morning at 8:00, the precious metal trades only slightly lower, at 1,931.

Xetra-Gold weekly recap

The Xetra-Gold price also gained. From 56.35 € per gram, it closed the week at 56.80 and reached 57.80 yesterday. It was expected to kick off trading this morning at a slightly lighter 57.30.

As Asian markets will be ringing in the Chinese New Year, the week ahead should remain calm. The US and UK central banks as well as the ECB will meet for their respective interest rate meetings the week after next. We might thus see some volatility throughout the coming week, caused by the markets’ general wait-and-see attitude.

I wish all readers a relaxing weekend.

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