Gold prices hit two-month high

In a week cut short by Monday’s Martin Luther King Jr. day in the US, gold prices continued to gain, despite the fact that government bond yields around the globe had risen significantly in the meantime. US Treasuries with maturities between two and ten years temporarily yielded at their highest since the start of the Covid-19 pandemic. In Germany, yields on ten-year Bunds briefly headed above zero for the first time since spring 2019. The slight appreciation of the US dollar over the course of the week also meant headwinds for gold prices.

Inflation: gold in demand as safe haven

On the other hand, gold prices were supported by data indicating that inflation is likely to remain at a high level for some time to come. UK inflation data for December once again surprised the markets, and in Germany, the producer price index rose to its highest level since calculations began in 1949. Oil prices climbed to seven-year highs; industrial metals alongside the precious metals palladium, platinum and silver have also seen significant gains since the beginning of the year. Considerable setbacks across stock markets, especially in the US, is likely an additional factor supporting demand for gold as a safe haven.

Gold in US dollars and euro highest since November

As a result, gold prices initially dropped from 1,827 US$ per ounce last Friday morning in the wake of rising yields to 1,806 on Tuesday, but then retraced its steps and rose to a two-month high at 1,848 yesterday afternoon alongside weak stock markets. This morning, the precious metal is trading at a slightly lower 1,838.

Gold prices also gained against the euro within regular trading. While Xetra-Gold traded at 51.20 on Friday afternoon at the end of last week and at a low for the week of 51.00, it reached a weekly as well as two-month high of 52.40 yesterday afternoon. Xetra-Gold was expected to kick off trading this morning at 52.15.

Coming up next week, the Fed meeting on Wednesday will likely be the focus of attention. The markets are hoping for clues on the gearing-up for the interest rate hike cycle.

I wish all readers a relaxing weekend.