Gold trading slackens following Fed meeting

Market report Michael Blumenroth – 16.06.2017

Weekly market report

Please note that these lines were, due to a local bank holiday, already written on Thursday morning. At that point, the results of the Fed meeting had already been processed on the markets.

Wednesday was the most eventful day in trading. Friday’s surprise outcome of the UK’s general election caused some upheaval across the markets after more or less calmly bobbing along on Monday and Tuesday. Weak US inflation data shook the markets on Wednesday afternoon, and the US dollar weakened considerably. Against the euro, it fell to its lowest since the US presidential election, to 1.1296. A number of other currencies also significantly strengthened against the US dollar, while the ten-year US government bonds’ returns fell to a new annual low.

All of this gave a jump start to gold. While it traded at 1,274 US$/ounce last Friday, it had previously set back to 1,260 US$/ounce. On Wednesday afternoon, the precious metal leapt to 1,280 US$/ounce after the publication of US consumer data but took a downward turn at around 8 p.m. following the Fed chair Janet Yellen’s statements: interest rate forecasts remained unchanged for the next months and years, in spite of the weak inflation data. As a result of these statements, the US dollar rebounded and US government bonds’ returns rose. Gold depreciated to 1,257.50 US$/ounce and has since slightly recovered. On Thursday morning it traded at 1,264 US$/ounce.

Gold denominated in euro saw similar setbacks. Xetra-Gold fell from 36.60 €/gram last Friday to a weekly low of 36.12 €/gram on Tuesday afternoon. On Thursday morning, Xetra-Gold traded at 36.25 €/gram.

On Thursday and Friday, further central bank meetings are scheduled, and it is likely that expectations for the Fed and its interest rate policy will continue to dominate the markets in the coming days and weeks.

We wish all of our readers a relaxing and sunny weekend. 

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