Gold prices at temporary six-month highs?

Market report Michael Blumenroth – 27.12.2018

Weekly market report

In spite of the holidays, the past days have been anything but boring. The stock markets and oil prices, in particular, got down to business. On Thursday morning, 27 December, when this report was written, the market situation looked somewhat more relaxed. However, the situation right before the end of the year remains nervous and tense.

Trump causes concern with attack on Fed chairman

With the exception of yesterday's second day of Christmas, there has been little sign of a year-end rally on the stock markets to date. In the week just before Christmas, the three leading US indices had dropped by between 6.9 and 8.4 per cent (Nasdaq). Fears of a slowdown of the global economy were partly to blame, as is the ongoing US-Chinese trade conflict. On Saturday morning, reports surfaced that US President Trump had asked officials how he could legally fire Jerome Powell, Chairman of the US Federal Reserve. This caused widespread concern, as did a short-term meeting between the US Treasury Secretary and high-ranking US bank representatives.

Tension eases due to excellent Christmas sales reports

On December 24, a short trading day in the US, economic woes caused stock indices and oil prices to plummet. At the same time, the safe havens gold, yen and government bonds were sought. Yesterday saw the strongest recovery in per cent for US equity markets since March 2009, with US retailers reporting excellent Christmas sales and US government officials stating that Jerome Powell's job remains one hundred per cent secure as well as reports of trade talks between the US and China beginning on 7th January. All of this brought some relief to the markets.

Gold in US dollar reaches highest levels since June

Gold traded at 1,262 $/ounce on Friday morning last week. During the course of the day, it retreated to 1,254 $/ounce but reached 1,270 $/ounce on Christmas Eve. Yesterday afternoon, the gold price reached its highest level since mid-June at 1,279 $/ounce. In light of the US equity markets’ recovery, it fell to 1,265 $/ounce. With stock markets in Europe starting off rather cautiously today and yields in the US continuing to fall, gold is also rebounding and currently trades at 1,272 $/ounce.

Similar development for Xetra-Gold

The euro traded somewhat weaker against the US dollar over Christmas, which also came to the benefit of the gold price in euros. Xetra-Gold rose from 35.40 €/gram last Friday morning after the Christmas break, to 35.90 €/gram this morning (Thursday), which is also its highest level since mid-June.

Gold likely to benefit from investors’ appetite for safe havens 

The price of gold is likely to remain under the influence of movements on the stock markets and the development of market interest rates in the US and could continue to benefit from investors seeking safe havens – that is, if market sentiment does not improve soon. 

I wish all our readers a happy start to 2019 and a pleasant and hopefully long and relaxing weekend.

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