Gold prices continue at high altitudes

The week once again kicked off with a bang. News of the two largest Swiss banks’ merger saw the markets in an extremely nervous state on Monday morning. The situation relaxed somewhat over the course of the day.

The stage was thus set for the supposed highlight of the week, the Fed meeting on Wednesday evening. Since the Fed is convinced of the robustness and stability of the US banking system, it again raised key interest rates by 0.25 percentage points, more or less in line with what had been announced beforehand. The Fed is planning a further rate hike at this level for the next meeting at the beginning of May, possibly marking the end of the rate hike cycle.

Market participants expect key rate cuts

What will happen next? While Fed Governor Jerome Powell has emphasised that interest rate cuts in the further course of 2023 are not part of his base scenario, money market futures markets are unwaveringly pricing in interest rate cuts of almost one percentage point for the second half of the year, starting as early as July.

This, in turn, means continued pressure on government bond yields, which again started to slide following the Fed meeting, also reflecting expectations of fairly timely rate cuts. Falling yields, continued anxiety across stock markets and a weaker US dollar due to expectations of interest rate cuts came together to feed this week’s ongoing gold price rally.

Gold in US dollars temporarily breaks through 2,000 US$

While gold traded at 1,930 US$ per ounce on Friday morning last week, it had already jumped to almost 1,990 by the evening. In a nervous start to the week on Monday, it temporarily reached 2,009.50. On Monday afternoon, markets started to calm down and gold dropped to 1,938 on Wednesday afternoon. However, as a result of the renewed crash in yields, especially in the US following the Fed meeting, the precious metal rebounded to 2,002 last night and at 8:00 this morning traded at around 1,990 US$ per ounce – nearly 160 US$ higher than the Friday before last.

Gold price gains in euros slightly less pronounced

The Xetra-Gold price also gained, although the stronger euro exchange rate somewhat slowed the price jump. Last Friday morning, Xetra-Gold traded at 58.20 € per gram, but jumped to 60.60 at the start of trading on Monday due to the teeming nervousness on the markets. By Wednesday, it dropped to its weekly low of 57.70 before recovering to 58.80 yesterday afternoon. This morning, Xetra-Gold was expected to start trading slightly higher, at around 59.00.

The financial markets will remain focused on the development of the news situation regarding the US regional banks and the resulting opinions on the Fed’s future monetary policy. Also, the end of the quarter is already approaching next week.

I wish all readers a relaxing weekend – even though it will be an hour shorter as we will be setting our clocks an hour forward.