Gold prices upbeat following Fed chair’s speech

The past week’s excitement was not limited to the stadiums of Doha, but also extended across the markets. The latter remained in a hawkish mood until Wednesday evening, when Fed chair Jerome Powell presented his view of monetary policy in a speech in Washington. To me personally, the strong market reactions were somewhat surprising, as – compared to the press conference at the last Fed meeting in early November – he said little to nothing new. Perhaps the markets were relieved to hear him reconfirm that the upcoming rate hike at the 14 December meeting will likely “only” be 0.5 percentage points and therefore below the previously expected 0.75. Following the speech, players however also priced expectations in that the Fed could end its rate hike cycle a little earlier than previously anticipated, which was perhaps not indicated through Powell’s remarks, but interpreted thus by the markets, nevertheless.

Euro above 1.05 US dollars

As a result, US government bond yields have dropped off significantly from Wednesday evening until this morning. The stock markets, on the other hand, and particularly the interest rate-sensitive technology indices, were on a roll. Another side effect: the US dollar lost value, with the euro rising, for the first time since the end of June, above the 1.05 mark. The first delicate easing of the pandemic restrictions in China, declining capital market interest rates and a weaker US dollar exchange rate all made for a healthy environment for gold prices.

While gold traded at 1,755 US$ per ounce last Friday and at a weekly low of 1,740 on Monday, it jumped upwards after Powell’s speech and traded at its weekly high (thus far) of 1,804 yesterday. It was also trading firmly around the 1,800 US$ mark at 8:00 this morning.

Xetra-Gold also on the rise

The Xetra-Gold price also rose, despite the firmer euro compared to the previous week. While Xetra-Gold traded at 54.15 € per gram early Friday last week, it dropped to 53.80 on Monday before rebounding to a weekly high of 55.15 within regular trading, boosted by the Fed chief’s statements. This morning, Xetra-Gold was expected to start trading at around 55.00.

This afternoon, US labour market data should move the markets. In the coming week, the markets will likely be mentally preparing for the various central bank meetings the week after next.