Gold prices temporarily reach record highs

Market report Michael Blumenroth – 11.03.2022

Weekly market report

The Russia-Ukraine war continues to cause unusually violent price fluctuations on the markets – which is, of course, a side note in view of the ongoing human tragedy.

The markets continue to focus on the pronounced volatility across commodity markets, where oil reached new 13-year highs at the beginning of the week. Prices for European natural gas on the Dutch exchange were at times twenty times higher than at the same time last year. And following a 250 per cent price jump, trading of nickel was suspended on the London Metal Exchange. Aluminium and copper, as well as Australian coal and palladium, also rose to new record highs. Hiked-up commodity prices indicate that inflation rates will continue to rise, and the 7.9 per cent reported yesterday for the US in February is unlikely to be the end of the line. Even the very cautious ECB stressed yesterday that it would keep an eye on inflation developments and therefore somewhat accelerated the planned exit from the bond-buying programme.

Commodities hit weekly low on Wednesday

Rising inflation expectations coupled with concerns about a continued escalation of the Russia-Ukraine war caused a temporary surge in demand for gold before it also slackened on Wednesday alongside oil and natural gas, in particular. Gold prices also faced some headwind from the rise in government bond yields, which resumed their pre-war levels.

Gold traded at 1,937 US$ per ounce last Friday morning. By Tuesday afternoon, it had reached around 2,070, as close as US$5 to its record level of August 2020. And in euros, gold traded above 1,900 € per ounce for the first time. With the setback – amongst others, oil prices dropped by more than 13 per cent – of some commodities on Wednesday, gold at times also lost more than four per cent and fell back to 1,972 US$ per ounce. After another foray above the 2,000 US$ per ounce mark yesterday afternoon, the precious metal retreated in the evening, in the wake of falling oil prices and rising capital market interest rates. This morning, gold traded at 1,990 US$ per ounce.

Xetra-Gold reaches all-time high

Week on week, the Xetra-Gold price also saw considerable gains, even trading at an all-time high for a while. At the end of last week, Xetra-Gold stood at 56.60 € per gram, rising to 61.15 on Tuesday afternoon and then falling back to 57.50 on Wednesday. This morning, Xetra-Gold was expected to kick off trading at a slightly higher 58.25.

The geopolitical situation and movements on the energy commodity markets continue to set the scene. In the coming week, the outcome of Wednesday evening’s Fed meeting should also attract significant attention.  

I wish all readers a sunny and peaceful weekend.

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