Markets meet headwinds from monetary policy

During a fairly relaxed week across stock markets, gold prices hovered around the 2,000 US$ per ounce mark. Last Friday, Fed monetary policy committee member Christopher Waller’s backing of further interest rate hikes by the Fed caused a significant rise in yields for US Treasuries. As a result of the higher US capital market interest rates, the US dollar also saw significant appreciation, while commodities, and in particular gold, slipped.

Interest rate hikes expected

With little action in terms of economic data, the markets focused on statements by Fed officials, who, like their ECB counterparts, reaffirmed a desire for further interest rate hikes. Markets are thus pricing in rate hikes for the respective meetings, scheduled in the first week of May. Yesterday’s weak US industrial data had little impact on market sentiment, although US yields dropped moderately. 

Slight week-on-week loss for gold

Over the course of the week, the precious metal slipped from 2,041 US$ per ounce last Friday morning to 1,992 following the Fed governor’s comments; bond market yields and the US dollar had simply risen too sharply. After a brief recovery to 2,010, gold dropped to its weekly low on Wednesday at around 1,970. With yesterday’s rebound in yields, it firmed up to above 2,010 but traded at a more subdued 1,995 US$ per ounce this morning at 8:00.

Xetra-Gold was bolstered by the weaker euro against the US dollar. From 59.30 € per gram early last Friday, it had dropped to 57.95 by Wednesday afternoon but recovered yesterday to near 59.00. This morning, Xetra-Gold was expected to start trading at around 58.60.

Gold prices will likely remain under the influence of central bank monetary policy. The upcoming meetings of the Fed as well as the ECB are scheduled in early May. Later today, we await the release of important leading indicators, the US and Eurozone purchasing managers’ indices. 

I wish all readers a relaxing, sunny weekend.