Gold prices show signs of recovery

The Gold price continues to fluctuate wildly, although it has more steadily risen in recent days. After dropping from its record high of 3,500 US$ per troy ounce on 22 April to just under US$300 per ounce within seven trading days until 1 May, it rose by around five per cent on Monday and Tuesday this week, to above the 3,400 US$ mark. This was probably due primarily to purchases by Asian investors, whose interest in buying the precious metal appears unabated. The appreciation of many Asian currencies against the US dollar at the beginning of the week also made gold cheaper in the respective home currencies. One spectacular example: The temporary appreciation of the Taiwanese dollar against the US dollar by around ten per cent within two trading days. The currencies of Thailand, Malaysia and Hong Kong also appreciated against the US dollar, as did the Chinese renminbi.

Decline in speculative gold positions

However, participation of speculative investors on the US futures exchanges in the robust performance of gold prices (currently up 29 per cent since the beginning of the year) has slackened. Their long positions weakened last week to their lowest level in 14 months. Following somewhat more conciliatory tones from the parties involved in the trade dispute between the US and China, gold positions acquired as a ‘safe haven’ may have been further reduced. In the medium term, the sharp decline in speculative positions lowers the risk of sharp price setbacks due to profit-taking.

Trump tariffs: US and China to conduct first trade talks 

Gold prices were kept somewhat in check by the planned meeting between US and Chinese trade representatives in Geneva this coming weekend, which will focus on the de-escalation of the trade conflict. Following the initial reports on the talks, the gold price temporarily weakened yesterday evening after the Fed meeting.

Fed holds US key interest rate steady

As expected, the US Federal Reserve left its key interest rates unchanged in the range of 4.25 to 4.50 per cent. In its statement, the Fed emphasized the growing risks of both higher inflation and rising unemployment. As uncertainty about the economic outlook has increased further, the Fed will not rush into interest rate cuts and continues to monitor the data patiently. Following Governor Powell’s press conference, the interest rate futures markets continued to price in three further interest rate cuts by the end of the year, but towards the end of the third quarter. Some commentators expect further interest rate cuts in December 2025 at the earliest, or even as late as 2026. Persistently high interest rates in the US could have a slightly dampening effect on gold prices.

Gold in US dollars and Xetra-Gold slightly above previous week’s level

Last Wednesday morning, gold traded at 3,312 US$ per ounce. It initially came under noticeable pressure and fell to 3,202 on Thursday, 1 May. After closing the week at 3,240, it gained almost 200 US$ per ounce on Monday and Tuesday to reach 3,435. However, reports of talks between the US and China and the Fed’s decision to put further interest rate cuts on the back burner slowed its momentum. This morning, gold started the European trading day slightly lower at 3,370 US$ per ounce.

The Xetra-Gold price also rose week on week, although the slightly weaker euro against the US dollar also came into play. Xetra-Gold initially dropped from 93.65 € per gram last Wednesday morning to 91.65 € on Friday afternoon, but the new week brought a sharp upturn to 96.40 on Tuesday. If the 7 a.m. level holds firm at the opening of trading, Xetra-Gold would start the European trading day at around 96.00 €, but prices have fallen back moderately over the past few minutes.

In addition to developments in the trade conflict and several central bank meetings taking place today, the data calendar for the coming week includes a number of US economic figures, such as consumer price data and retail sales, which should provide initial indications of the extent to which the US tariffs that came into force at the beginning of April are affecting the real economy.

I wish all readers a sunny weekend.