Markets in suspense prior to French presidential election

Market report Michael Blumenroth – 21.04.2017

Weekly market report

The week following Easter saw slow trading activities across major markets, among them the gold market. On Easter Monday, most traders had the day off, and gold soared to its highest price in US dollars since mid-November, to 1,295 US$/ounce. This development went hand in hand with the US dollar dropping to its lowest level since November (measured against the DXY index) and declining yields for ten-year US government bonds, which dropped to a new annual low for 2017. During the course of the week, some of these movements however saw a turnaround. The dominating topic of the week was the UK’s general election, which however had little influence on the precious metals markets. The markets are continuing to focus on the French presidential elections, with their first round on Sunday. A slight carelessness might have caught hold over the past one or two days, which in turn caused the gold price as a safe haven to marginally drop. 

While the precious metal traded at 1,288 US$/ounce on Holy Thursday, it climbed up to its highest level since the night of the US presidential election on 9 November, to 1,295.50 US$/ounce. On Wednesday afternoon, the markets showed evidence of a major sell order and alongside a steadier US dollar, the gold price weakened accordingly, to its weekly low of 1,274.50 US$/ounce. It currently trades somewhat firmer at 1,281 US$/ounce. 

Xetra-Gold already saw its weekly high on Holy Thursday. From 38.85 €/gram, it slightly rose to 38.95 €/gram. During the course of the week, it slumped to 38.11 €/gram yesterday morning – due also to the firm euro against the greenback. It currently trades somewhat stronger at 38.40 €/gram. 

All eyes are now on France and its presidential elections. Should Macron and Fillon reach the second round, safe haven positions might be discarded. If however Le Pen and Melenchon turn out to be the final candidates, investors are likely to seek safe havens. In mixed results (moderate/populistic), it all would depend on the distribution of votes. The second and decisive round of elections is scheduled on 7 May.

To all our readers, have a sunny and relaxing spring weekend.

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