Gold prices somewhat lighter amid turbulence

Market report Michael Blumenroth – 29.01.2021

Weekly market report

Market participants had eagerly awaited the outcome of the January Fed meeting. As expected, US monetary watchdogs did not waver. Interest rates and the volume of bond purchases remain unchanged, and, as recently indicated by Fed Governor Jerome Powell, will continue thus in the foreseeable future. The strong upward movement of yields on long-term US Treasuries in the second week of January, driven by speculation about an imminent reduction in bond purchases, had already come to a standstill in the previous days.

Major indices suffer significant losses

With mounting negative reports about the further advance of Covid-19 and its mutations alongside new travel and mobility restrictions being considered around the globe, a number of investors seem to be pondering whether stock prices might be too far ahead of real economic development. Especially on Wednesday and Thursday morning, many leading indices around the world thus plunged, and continue to trade in the red this morning.

Strong US dollar slows gold price

The past days might have been a “golden” hour, as the precious metal usually functions as a safe haven. The US dollar, however, was in demand as a safe haven currency with fluctuating share prices and commodity producing countries’ currencies under pressure, and gold prices weakened accordingly. Yesterday afternoon saw a short-lived recovery when gold followed silver prices for a few hours in the wake of an upward rally initiated by day traders. The bottom line: gold prices declined slightly over the course of the week due to the stronger US dollar. 

After rising from US$1,862 per ounce last Friday morning to 1,868 on Monday afternoon, the gold price had dropped to 1,832 by Wednesday afternoon as a result of the firm US dollar. The jump back to 1,865 yesterday afternoon was, as mentioned, short-lived. Currently, gold trades around US$ 1,850 per ounce.

Xetra-Gold slightly weaker week on week

The Xetra-Gold price benefited somewhat from the weakness of the euro and the strength of the US dollar. Last Friday, it declined from €49.20 per gram in the morning to 48.60, recovered to its weekly high of 49.40 on Monday afternoon but caved to 48.90 on Wednesday. Xetra-Gold traded around €49.15 per gram this morning.

The development of the US dollar exchange rate will likely continue to lead the way for gold prices.

I wish all readers a relaxing weekend.

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