Gold prices remain within narrow trading range

Market report Michael Blumenroth – 21.09.2018

Weekly market report

It has been an amazingly quiet week for the gold price. At present, the situation for emerging market currencies seems to be easing somewhat, for reasons not quite clear. With the interest rate hikes in Turkey and Russia, investors seem more relaxed about the emerging market currencies – or else they have gotten used to the status quo. The same applies to the trade dispute between the US and China. Monday did see another blow (new tariffs on goods worth a total of US$200 billion from the US against China) and a counter-attack (imposition of tariffs on US products worth just under US$70 billion by China). The markets, however, also seem to have become somewhat used to such headlines, and analysts still rate the impact of the current situation on global economic growth as minor.

US markets soar

Two further market movements were in the spotlight this week: the record highs achieved by the Dow Jones Index and the S&P500 in the US, and the fact that yields, i.e. market interest rates both in Europe and in particular in the US, continue to rise. Ten-year US government bonds are now yielding almost 3.1 per cent, while two-year bonds are yielding more than they have in eleven years, more than 2.8 per cent.

Gold price holds up

These two market developments are usually bad news for gold. In view of this, the gold price at least held up quite well. However, major speculative investors in the US continue to rely on falling gold prices on the futures markets by means of short selling, but these short positions do have to be closed at some point.

Gold in US dollar nearly unchanged

Gold traded at $1,208/ounce on Friday morning last week before falling to a weekly low of $1,192/ounce in the evening after the publication of good economic data for the US. Already on Monday, gold rebounded at $1,205/ounce. In the course of the week, it rose in a “one step forward and half a step back” mode. The weekly high for gold this morning was $1,211/oz. The most precious of metals currently trades at $1,209/ounce, almost unchanged from the previous week.

Gold in Euro slightly weaker

The euro weakened against the U.S. dollar during the course of this week, but then rose relatively sharply. Against the euro, the gold price will therefore trade somewhat cheaper over the course of this week. The price of Xetra-Gold fell from €33.15/gram last Friday morning to €32.93/gram on Tuesday. After that, it climbed to its weekly high of €33.20/gram yesterday afternoon before the strong Euro gain slowed it down. It currently stands at 33.00 €/gram.

High expectations for Fed

Next Wednesday evening, all eyes will be on the Fed and the press conference with Jerome Powell. It is certain that key rates will be raised again by 25 basis points next week. The outlook for potential interest rate hikes in 2019 is likely to be more exciting.

I wish all readers a happy and relaxing weekend.

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