Gold prices rebound after slight setback

Market report Michael Blumenroth – 06.07.2018

Weekly market report

The early World Cup exit of the German soccer team seems to have set a bad example for the gold prices. This was due in part to the new US dollar strength against a number of emerging countries’ currencies. Another contributing factor was the smouldering US-Chinese and US-European trade conflict, which weighed down commodities prices in expectation of dropping demand in the face of new trade barriers. Copper fell to a ten-month low, and platinum was also among the metals heavily affected by the development.

What effect will the trade conflict have?

Tariffs on Chinese goods exported to the US became effective today, and with China’s counter-reaction, the trade conflict is gaining momentum. It is too early to say how the gold prices will develop in this environment. On Friday two weeks ago, the precious metal stood at 1,270 $/ounce. With the exception of two short recovery periods, gold prices continually dropped in the days that followed, hitting a six-month low of 1,238 $/ounce last Tuesday. Bargain hunters aided its recovery until yesterday to 1,261 $/ounce. At the time of writing, gold in US dollars trades around 1,257 per ounce.

Central banks’ interest rate policy remains important factor

The euro-US dollar rate seems to be stuck in a relatively tight trading span between 1.15 and 1.18. Market observers are awaiting the central banks’ further interest rate policy signals. The general mood regarding the trade conflict seems to be that more than any other nation, the US would suffer from the consequences of a further escalation.   

Gold in euro lingers slightly above annual low

Gold in euro is painting a similar chart picture. After an initial decline, we saw a slight rebound. In euro per gram, the price of Xetra Gold dropped from 35.10 Friday two weeks ago to 34.30 this past Tuesday. On Wednesday, it rose further to 34.75 €/gram. The calculated opening price today should be 34.55 €/gram. Prices have, therefore, remained marginally above the annual low of 34.25€/gram of 20 March.   

In addition to the above mentioned tariffs, we will also see the publication of US labour market data today. Throughout the next days, news on the trade conflict will keep us occupied, as well as the upcoming US inflation data and, from a geopolitical perspective, the NATO summit at the end of next week.

I wish all of our readers a happy summer weekend. 

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