Janet Yellen gives gold a helping hand

Market report Michael Blumenroth – 17.03.2017

Weekly market report

In contrast to the week prior, this week has been somewhat successful for gold. All eyes, of course, were on Wednesday’s Fed meeting in the US. Market participants had eagerly awaited its outcome, hoping for indicators as to how aggressively the Federal Reserve would further pursue its interest rate policy. Some had expected that it would increase its forecasts for 2017 from three to four rate hikes, or at least announce an increase for 2018.

Expectations were, however, disappointed; the Fed gave no clues as to an increased eagerness for interest rate hikes. This message caused US government bond returns to experience a significant slump on Wednesday evening, in turn causing the US dollar to come under pressure against most other currencies.

Sinking returns and a weaker US dollar – both usually have positive effects on gold prices. This week was no exception:

While gold still traded at a meek 1,198 US$/ounce just last Friday, and at around 1,200 US$/ounce prior to the Fed meeting, it swiftly climbed upwards to 1,220 US$/ounce after the meeting and reached its weekly high yesterday at 1,233.50 US$/ounce, falling only slightly since then to its current 1,228 US$/ounce.

Due to the stronger euro, euro zone profits have not been shining quite as brightly. There was, however, steady upward movement, currently of approximately one per cent week-on-week. From 36.35 €/gram last Friday, Xetra-Gold climbed to 37 €/gram yesterday at moon. This morning at the start of trading, it traded marginally lower at 36.70 €/gram.  

Today’s focus will most likely be on the meeting of Angela Merkel and Donald Trump. Next week, market observers will be attentive to any new indications of Fed or ECB representatives concerning future interest rate increases. Europe is also seeing an increasing number of demands for a gentle withdrawal from negative interest policy. For the gold price, the further development of the US dollar remains in important factor: will its current weakness – the US dollar index DXY has fallen by more than 1.5 per cent since Wednesday evening – remain temporary?

I wish all of our readers a relaxing weekend.  

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