Gold temporarily trades above 1,900 US$ per ounce

They may not come as news, but here are the two questions that market participants continue to focus on:

Are the current unusually high inflation rates just temporary or will they remain above central bank targets for a longer period? And what are the central banks’ plans?

On the one hand, an increasing number of statements by various monetary watchdogs around the globe suggest a possible turnaround in interest rates in the foreseeable future. Over the past week, Hungary, New Zealand and South Korea, among others, signalled as much. On the other hand, Fed and ECB officials never tire of pointing out, with the persistence of a Tibetan prayer wheel, that it will be quite a while before US or eurozone interest rates are raised.

Weak US dollar fuels gold price

The constellation of relatively high inflation rates or expectations and a Fed supposedly standing on the sidelines as a silent observer placed considerable pressure on the US dollar until midweek. It dropped to its lowest level since 6 January both against the euro and the nine other G10 countries’ currencies. Conversely, the gold price in US dollars climbed to its highest level since – you’ve guessed correctly! – 6 January.

With the end of the month in sight, reallocations and disposals ruled the currency markets, allowing the US dollar to recover somewhat in the second half of the week. As Monday is a bank holiday in both New York and London, the trading moth there ends today.

Weekly high for gold in US dollar and euro on Wednesday

Over the course of this week, the gold price climbed from 1,875 US$ per ounce last Friday morning to 1,912.75 on Wednesday afternoon, the highest level since 6 January 2021, as mentioned. With the US dollar slightly firmer and gently rising yields, gold retreated to US$1,888 and traded at 1,891 US$ per ounce this morning.

The price of Xetra-Gold followed this example and initially rose from 49.30 € per gram last Friday to its weekly high of 50.30 on Wednesday afternoon within regular trading. It dropped to 49.80 yesterday and opened trading today around 49.95 € per gram.

With the month of June starting Tuesday, the publication of US labour market data on Friday and several central banks’ meetings over the next two weeks are likely to be the focus of interest.

I wish all our readers a happy and sunny weekend.