Gold price revived in view of geopolitical uncertainty

Market report Michael Blumenroth – 23.03.2018

Weekly market report

Following weeks of lethargy, the gold price has regained traction during the past hours and has reached its four-week high.

The past week has seen a number of important events. In terms of monetary policy, all eyes were on the Fed meeting, which seemingly left traders somewhat perplexed. While the Fed did maintain its forecast of a total of four interest rate hikes this year, it increased that of 2019 from two to three. Following a short pause for thought, investors opted to focus on the confirmed three hikes in the nearer future and ignore the 2019 prediction. The US dollar accordingly experienced a setback on Wednesday evening against a rising gold price.   

Markets shaken by progressing trade conflict 

The looming trade conflict between the US and China will likely have a lasting effect on the markets, which since yesterday are lying in wait to learn which countries will be affected by the announced tariffs on steel and aluminium. The EU at least for now has been removed from the list, while China has not. And even though this had been expected, the harsh reality of the fact seems to have shocked a number of market participants. The stock markets plunged across Europe and the US, and the Asian stock markets followed suit this morning. Making matters worse is the fact that Trump fired security adviser McMaster after trading closed yesterday evening. His restraining influence regarding US measures against Iran and North Korea is now gone. 

Safe-haven appeal spurs gold price

Hence, gold was having a hard time before hitting a new four-year high last night. While it traded at 1,318.50 $/ounce exactly a week ago, it saw listless trading activity and fell to its weekly low of 1,307.50 $/ounce. Following the Fed meeting, the precious metal climbed to 1,335 $/ounce and saw a slight decline against a stronger US dollar yesterday. This morning, however, it climbed to 1,343 $/ounce and currently trades close by at 1,341 $/ounce; a weekly gain of approximately 1.8 per cent. 

Against the euro, gold has also risen since last Friday. From 34.45 €/gram a week ago and 34.25 €/gram on Tuesday, the price of Xetra-Gold has climbed to 34.95 €/gram at today’s start of trading. It is currently quoted at just under 34.95 €/gram. 

Conflict likely to dominate next week’s trading activity

Throughout the next days, the markets will remain focused on new developments in the trade conflict, such as the questions of how China will react and how it will continue to influence the stock markets, which appeared intimidated this morning across Europe. 

I wish all readers a happy weekend, and a restful vacation to those taking a break from work over Easter. 

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