Gold prices remain surprisingly steady

Market report Michael Blumenroth – 25.01.2019

Weekly market report

With the last market commentary published January 16th, almost a week and a half have passed. In spite of the ongoing geopolitical uncertainties (Brexit, US budget freeze, US-China trade conflict), surprisingly little has changed.

Recent weeks have seen healthy demand for gold 

Due to the widespread political uncertainties, demand for gold and gold products in Europe in recent weeks has been healthy. At the end of 2018, contributing factors were the weakening stock markets and the worldwide drop in yields/market interest rates on government bonds.

Several factors weigh on the gold price

So far in 2019, at least the stock markets have seen a decent recovery. This may have resulted in some "safe havens" the form of gold positions being liquidated in. In addition, yields in the US have also risen somewhat since their low at the end of 2018, which placed some pressure on the gold price, as did the temporary strengthening of the US dollar.

Euro weaker

Yesterday, the ECB again signalled that it was in no hurry to raise interest rates. Shortly before, poor economic data had been published on the purchasing managers' indices of the euro zone, which did nothing to promote economic optimism. While this is weighing on the euro, the gold price on the other hand has somewhat benefited due to further declining yields.

Gold in US dollars virtually unchanged

Gold traded at 1,293 US$/ounce in US dollars on Wednesday evening last week. From there, it had slipped to 1,277 US$/ounce by this week Monday and thus reached this month’s low. It has since been able to recover, but has been trading listlessly within a narrow trade margin between 1,277 US$/ounce and 1,287 US$/ounce since Monday. The precious metal has not strayed far and currently trades at 1,285 US$/ounce.

Euro remains settled within recent weeks’ range

For weeks, the euro has been trading against the US dollar within a familiar and well-defined range of 1.13 to 1.15, but slipped briefly below the 1.13 level following yesterday’s ECB meeting.

Xetra-Gold remains at a high level

Due to the weaker euro, the price of Xetra-Gold has remained almost unchanged from my last commentary’s level, and thus at its highest since June 2017. From 36.45 €/gram last Wednesday evening, it temporarily receded to 36.12 €/gram on Monday morning. Since then, however, it has been gaining ground amid some ups and downs, and stood at 36.50 €/gram at the time these lines were written on Friday morning.

Upcoming week likely more eventful

The gold price will certainly keep an eye on next week’s Fed meeting, but due to the US budget dispute and the shutdown, US economic data will remain sparse. The Fed therefore has no real basis for decision-making and the meeting will most likely be a 'non-event'. It will, however, be exciting to see whether the US and China will find common ground on trade issues when a Chinese delegation is scheduled to visit Washington next week. The question of what happens two months before Britain's departure from the EU also serves up ample tension.

I wish all readers a great weekend.  

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