Gold remain above 1,300 US$/ounce mark

Market report Michael Blumenroth – 08.02.2019

Weekly market report

After the beginning of the week was uneventful, yesterday (Thursday) saw a rise in risk aversion. On Tuesday in particular, the stock markets overall were still optimistic and relaxed, also due to the publication of a number of large companies’ sound quarterly results. The US dollar was also able to gain some ground.

Safe havens in demand

However, the EU Commission yesterday significantly reduced its growth forecasts for Italy and Germany for 2019 after the publication of unfavourable economic data, and Donald Trump practically ruled out a meeting with China's President Xi to settle the trade conflict in the near future. As a result, risk appetite declined and safe havens were back in demand.

Government bonds rise

Although this provided a slight boost to the US dollar (especially against the Canadian, Australian and New Zealand dollars), it also generated demand for government bonds, especially from the US and Germany (and thus lower market interest rates). Safe havens such as gold were also sought, and the gold price partly made up for Wednesday evening’s losses.

Gold in US dollars slightly weaker week-on-week

In US dollars, gold traded at 1,318.50 $/ounce on Friday morning last week. Shortly before the release of strong US labour market data on Friday afternoon, the precious metal rebounded to 1,323.50 $/ounce. Market interest rates/yields then rose for a short period, so that the gold price temporarily headed south. On Thursday morning, it reached a weekly low at 1,302 $/ounce. Due to the search for safe havens, it was able to recover and traded at 1,309 $/ounce this morning.

Slight weekly gain for Xetra-Gold

After a getting off to strong start, the euro came under some pressure against the US dollar. Thanks to the weaker euro, Xetra-Gold is trading marginally higher than last Friday and is still at a 21-month high. Due to a slightly rebounding euro on Monday, gold receded, from 37.05 €/gram last Friday morning, to its weekly low of 36.80 €/gram. The gold price then crept up to 37.20 €/gram – the above mentioned 21-month high – until yesterday afternoon. Since then, it has fallen only slightly, to its current level of 37.10 €/gram.

Weekly outlook

The price of gold will certainly continue to be influenced by interest rate developments, while keeping an eye on the equity market and the US-China trade conflict. In the current environment, safe havens are likely to remain in demand.

I wish all readers a relaxing weekend. 

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