Gold prices slightly firmer in uninspired trading

Market report Michael Blumenroth – 14.09.2018

Weekly market report

So far, the week has seen relative calm across most markets. The focus largely remained on emerging market currencies. Observers eagerly awaited yesterday's meeting of the Turkish National Bank, which had shied away from lowering interest rates during the turbulent past few weeks. Yesterday, however, it made up for its prior hesitation in a single stroke and raised the key interest rate from 17.75 to 24 percent. This led to a decent recovery of both the Turkish lira and some other emerging market currencies, such as the South African rand, the Indian rupee and the Russian rouble, which in turn should have a supportive effect on the gold price.

US dollar weakens

Yesterday, the Euro also rose against the US dollar, to a two-week high of more than €1.17/$, also due to the fact that the ECB expressed great confidence in the economic development and the development of the core inflation rate in the foreseeable future. At the same time, the rise in consumer prices in the US was slightly below expectations, which had a somewhat dampening effect on the US dollar. All of this was favourable to the development of the gold price.

Gold faces headwind in US 

The flip side of the coin was the data on wage developments in the US, which was published last Friday and exceeded expectations. In the medium term, inflationary pressure is building up here, which could keep the Fed on its toes in raising key rates. In addition, yields (market interest rates) on two-year US government bonds rose to around 2.77 per cent last week, the highest level since July 2007 (!). This, in turn, means that the gold price faces some headwind, as the safe interest rate may now appear attractive to many investors.

Gold price rises marginally

The gold price is somewhat torn between these two factors and, while it remains indecisive, it is currently trading at least slightly higher than eight days ago.

Small weekly gain for gold in US dollars

On Thursday morning last week, gold traded at $1,197/ounce before moving sideways and then down over the next few days. The low for the week was marked at $1,188/ounce on Tuesday afternoon. With a slightly weaker US dollar against most other currencies, gold climbed to its weekly high of $1,212.50/ounce yesterday afternoon. The most precious of all metals is currently traded at $1,208/ounce. A weekly gain of just under one percent, which once again shows that gold is currently trading in rather calm waters.

Gold in euro remains almost unchanged

The week has seen the euro initially weakening against the US dollar, then rising. Against the euro, the gold price thus trades almost unchanged, with a marginal rise over the course of the week. The price of Xetra-Gold dropped from €33.12/gram last Thursday morning to €33.00/gram on Tuesday afternoon, then climbed to his weekly high of €33.40/gram yesterday morning before weakening again somewhat with the marked rise of the euro. It currently stands at €33.15/gram.

Trade conflict, US market interest remain in spotlight

In the next few days, the trade conflict between the US and China will certainly remain in the spotlight.  At the moment, investors are relaxing, as evident in the six-week low of the safe haven yen against the US dollar. In addition, market participants will certainly also keep a close eye on the development of market interest rates in the US.

I wish all readers happy weekend.

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