Gold rally briefly slowed by US inflation data

Friday’s price rise, following the publication of US labour market data, was somewhat spectacular. The originally reported increase in the number of employees for December and January was revised significantly downwards with an unexpected rise in unemployment, while wages and salaries also remained below expectations.

Gold price hits new record high

The slight US labour market slowdown caused market participants to raise their expectations for near-future Fed interest rate cuts. As a result, capital market interest rates on US government bonds retreated, and gold rose by more than 35 US$ per ounce to a new all-time high of 2,195 US$ per ounce. A number of currencies, including the euro, also hit record highs.

Market participants started the week cautiously, as the US consumer price index for February, important to Fed monetary policy, was published on Tuesday. The data proved more favourable than anticipated and caused a counter movement on the markets to the one we had seen following labour market data on Friday prior. Market participants were tangibly more cautious pricing in US interest rate cuts. Yields rose, gold prices weakened.  

Fluctuations over the course of the week

Nevertheless, the gold price remained at a high level. From last Thursday morning’s 2,156 US$ per ounce, it saw sideways trading on Thursday but shot to a record high of 2,195, as mentioned above, due to the mixed US labour market data. Following the US inflation data, gold saw a short slump to around 2,150, before recovering to around 2,175 yesterday – despite a further rise in yields. As a result, European trading today (Thursday) is expected to start at a slightly higher level than last week, at 2,169 US$ per ounce.

Xetra-Gold also ventured into new hights, from an already very high 63.50 € per gram early last Thursday to a new all-time high of 64.30 on Monday afternoon. The US inflation data caused a setback to 63.45. This morning, Xetra-Gold is expected to kick off trading at around 63.75 € per gram.

A total of almost 20 central banks will convene next week, and while very few of them are likely to make changes to their monetary policy, the Fed forecasts regarding its future monetary policy in particular are likely to bear market-moving potential. Wednesday evening therefore deserves special attention. Gold prices have possibly earned a break before their next summit attempt.
I wish all readers a relaxing, golden weekend.