Markets remain relatively calm

Market report Michael Blumenroth – 03.05.2017

Weekly market report

Surprisingly, the markets are still unusually calm. The volatility index for shares, VIX, which is traded on the futures exchanges, fell to its lowest level since 2007, and the euro-dollar exchange rate has hardly budged. This is of course in part due to the European bank holidays as well as Golden Week in Japan, which starts today.

Calm stock markets at record levels – naturally not an environment to seek safe investments. The gold price suffered, accordingly. From 1,267 US$/ounce in Friday and a peak at 1,271 US$/ounce in Asia on Monday morning it fell to 1,252 US$/ounce in Tuesday afternoon and currently trades at 1,255 US$/ounce.

The Xetra-Gold price followed suit, from 37.22 €/gram to 36.90 €/gram on Tuesday afternoon, and 37€/gram at the time of publication.

The next days will see a number of important data as well as important decisions. The most impactful, of course, will be Sunday’s run-off ballot in France. While market participants expect a firm Macron victory, a surprise win for Le Pen would cause upheaval across the markets on Monday morning.

But first, tonight’s Fed meeting might hold an indication as to whether the next base rate increase will occur in June. A Fed statement that remains vague or restrained could boost the gold price, as an interest rate hike for June is currently priced in at an almost 70 per cent probability. On Friday, the market is expecting strong labour market data from the US. The more disappointing they turn out, the better for the gold price and vice versa.  

Let’s wait and see. We hope to see you again here next week at our usual time of publication on Friday morning.

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