Gold prices recover slightly, remain under the spell of US dollar fluctuation

Market report Michael Blumenroth – 24.08.2018

Weekly market report

It has been a relatively calm week across the markets. Precious metals markets once again were heavily influenced by the movements of the US dollar. The crisis around the Turkish lira, however, took a break this week, as Turkey has had a week of national public holidays since Monday.

The week’s development sees US dollar weaken

This week, the US dollar has retreated somewhat after its sharp rise as a safe haven last week. One reason for this development was the regained risk appetite of many investors, which in turn made safe haven investments appear less necessary. On the other hand, US President Trump had expressed his unease in an interview about what he considered the Fed's aggressive interest rate hike. And last but not least, the statements of the US President’s former lawyer caused talk of possible impeachment proceedings among a number of market observers.

Trump controversy might cause safe havens to retain their appeal 

We will see whether there really is less need for safe havens in the next few weeks. On the other two points, it can be said that the US President has neither the authority to issue instructions to the central bank nor can he dismiss its chairman quite so easily. And on the subject of impeachment, there would be many hurdles to overcome, even if the Democrats win the majority in the US congressional elections in early November, making it close to impossible to dismiss a US president who has immunity during his term of office.

Gold prices in US dollar retreat

Gold prices rose slightly as the US dollar weakened over the week. Last Friday, gold was trading at a low for the day of $1,172/ounce. After the above developments, it rose to $1,201.50/ounce on Wednesday afternoon, when the euro also reached its weekly high against the US-Dollar. Since then, the Greenback has regained some ground. Conversely, gold fell to $1,183/ounce last night. The most precious of metals currently trades at $1,189/ounce.

Gold in Euro also drops

The euro/US dollar exchange rate recovered somewhat from its 14-month lows. Against the euro, the gold price thus fell slightly over the course of this week. In euros per gram, the Xetra gold price rose from €33.23/gram last Friday morning to €33.55/gram on Monday noon. Afterwards, however, things again went downhill, as the rise of the euro against the US dollar more than compensated for the rise of the gold price in US dollar. Yesterday, it stood at a weekly low of 33.00 €/gram and currently trades just slightly above that level at 33.05 €/gram.

What’s in store next week?

Next up on the agenda are news on the trade dispute and the central bank meetings in September. For the further fate of the gold price, the development of the euro/US dollar exchange rate should be decisive. Next Monday is a national holiday in London; the following week in the US. Traders should then be returning from vacation, and the further course for autumn should become clear.

I wish all our readers a restful weekend.

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