Gold prices in narrow range decline slightly

Market report Michael Blumenroth – 06.09.2018

Weekly market report

The following lines were written a day earlier than usual, on Thursday instead of Friday. Please note that the prices quoted below therefore refer to the situation on Thursday morning.

Continuing focus on emerging markets currencies, trade dispute

This far into the week, currencies of the so-called emerging markets have been weak. In addition to the currencies that were the focus of attention throughout the previous weeks, i.e. the Turkish lira and the Argentine peso, the South African rand and the Indian rupee also took a hit. The development of the rand is easily explained; South Africa officially fell into recession in the second quarter of 2018 with the renewed drop of the GDP. Against the US dollar and the euro, the rand fell within sight of its all-time lows of January 2016, while the Indian rupee has already devalued to a new all-time low against the US dollar, with the reasons not quite as clear as with the rand. The rand is the currency of one of the world's largest gold producing countries, and its weakness increases the appeal for local producers to sell gold on the world market. At the same time, the precious metal’s price in rupee is becoming more expensive every day for Indian consumers. Now that the second round of US tariff increases for Chinese goods is imminent, the focus in the next few days could also be on trade disputes.

Gold drops below $1,200/ounce

Gold is not currently in demand as a safe haven. So far this week, however, it has held up better than silver or copper. Last Friday morning, gold traded at $1,208 before falling below $1,200/ounce in the afternoon. With the US dollar again strengthening against emerging and commodity currencies, it dropped to $1,190/ounce (on Tuesday) over the week. Currently (Thursday morning) the most precious of all metals is traded at $1,197/ounce. The narrow trading range clearly shows that gold wasn't really the focus of investors this week.

Gold in euro also lacks stamina

The euro weakened against the US dollar during the week, but rose again slightly yesterday afternoon. The price of gold also dropped against the euro during the course of this week. In euros per gram, Xetra-Gold rose from €33.25/gram last Friday morning to €33.35/gram on Monday noon. After that, however, things again went downhill. Yesterday, it stood at a weekly low of 33.08 €/gram and currently trades marginally higher at €33.12/gram.

Coming up

In the next few days, the trade conflict between the US and China (new tariffs as of tomorrow?) will certainly be the focus of attention. But the emerging market currency situation is also likely to keep investors on their toes for some time to come. Tomorrow will see the publication of US labour market data. 

I wish all readers a pleasant weekend.

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