Gold temporarily climbs to new 2017 highs
Market report Michael Blumenroth – 03.02.2017
Weekly market report
Thus far, it has been a pleasing week for investors in the most precious of metals. This sentiment was very much due to the temporary weakening of the US dollar. Represented in the DXY index, it fell to its lowest level since 14 December on Thursday. This was also due to the fact that the new head of the National Trade Council Peter Navarro accused Germany to profit from an – in his opinion – much too low exchange rate of the euro. Trump himself accused both Japan and China of currency manipulation. The markets understood this message to mean that the US government intends to inhibit any further appreciation of the US dollar. On Wednesday, the US central bank gave no indication of an intent to accelerate the interest rate increase cycle.
The gold prices also profited from the fact that government bond returns headed southward, especially yesterday. Interest rate bearing investments are therefore no longer a strong competition.
Furthermore, the somewhat erratic and contradictory policy of the new US government seems to be increasing the demand for safe havens. During the course of the week, the Swiss franc and the Japanese yen were in high demand.
Demand for gold was also boosted accordingly. Traded at approximately 1,185 US$/ounce last Friday morning, it climbed consistently upward since the beginning of this week. It reached its weekly high yesterday, which was also its annual high for 2017, at 1,225 US$/ounce. The rebounding US dollar yesterday caused gold to drop slightly. It currently trades at 1,213 US$/ounce.
Eurozone investors have also seen a sound weekly profit. From 35.65 €/gram a week ago, the Xetra-Gold price climbed to yesterday’s weekly high of 36.45 €/gram. Mirroring the development in US dollar, it slackened yesterday afternoon and traded at 36.20 €/gram this morning. Xetra-Gold currently trades at 36.30 €/gram.
This afternoon, we will see the publication of US labour market data, which most likely will have no major repercussions. A very good report however could fuel expectations towards the Fed for an interest rate hike. Apart from that, we remain vigilant as to which further path the US government choses.
I wish all our readers a happy weekend in anticipation of spring – before Monday brings along a new cold front.