Golden October?

At least in terms of the weather, it has indeed been a golden month thus far. The same can be said for gold prices, which smoothly kicked off the final quarter.  

This was due, on the one hand, to a significant decline in government bond yields. US economic data published on Monday and Tuesday turned out significantly weaker than expected. The ISM index, considered a reliable leading indicator, took a surprisingly sharp tumble. According to the JOLTS report, the number of job openings on the US labour market dropped by 1.1 million within a month to around 10.05 million. The markets interpreted this development as decreasing inflationary pressure in the future, which would in turn necessitate fewer interest rate steps on the part of the Fed. With US dollar selling on the rise, it lost significantly against the euro and reached parity. 

Fed remains focused on curbing inflation

The tables turned in the second half of the week. The ISM services index was surprisingly solid and, more crucially, several members of the Fed Monetary Policy Committee commented that there was still a long way to go in terms of interest rate steps before US inflation would return to the target level of 2.0 per cent. As a result, equity markets gave up some of their gains from the first half of the week and we saw rising government bond yields as well as a strengthening US dollar. 

Stable gold prices

In this environment, gold prices were able to stand their ground. From 1,667 US$ per ounce on Friday morning last week, the precious metal rose significantly on Monday and Tuesday for the reasons mentioned above, reaching a high in the vicinity of 1,730. With the mood across the markets changing, prices somewhat dampened in the second half of the week but have thus far defended the 1,700 mark. This morning, gold in US dollars traded at around 1,710 per ounce.  

The Xetra-Gold price is also on firmer ground: from 54.50 € per gram last Friday morning, it rose to 56.10 yesterday afternoon and might even start trading a little higher at around 56.20 today. 

The US labour market report is scheduled for publication this afternoon. Next Thursday, US inflation data is likely to keep the markets spellbound. 

I wish all readers a happy late summer weekend.