Moderate recovery

Market report Michael Blumenroth – 25.08.2023

Weekly market report

Over the first half of the week, the US government bond yield rise continued almost unabated. Ten-year Treasuries yielded around 4.35 per cent, 30-years at 4.47, and two-years at above 5 per cent. It should come as no surprise that gold prices struggled at this level.

One man’s loss is another man’s gain, and on Wednesday, the tide turned: the data on Eurozone purchasing managers’ indices, a much-regarded leading indicator of economic development for the coming months, dropped more significantly than expected. The industrial sector as well as the service sector went below the 50-point threshold, which generally signals a recession in the respective sectors. Incidentally, German data turned out particularly weak, and the financial markets readjusted their expectations accordingly. While the interest rate futures markets had priced a further interest rate hike by the ECB at a probability of 85 per cent, it stood at only 55 per cent on Wednesday evening. As a result, yields on European government bonds came under significant pressure. The euro also weakened.

Gold tops 1,900 US$ per ounce mark

After US data also came in below expectations – although not quite as weakly as in Europe – yields there also slid downwards, providing a tailwind for gold prices, which at the beginning of the week remained stuck at the 1,890 US$ per ounce mark:

Last Friday, gold traded at 1,893 US$ per ounce, followed by the weekly low on Monday morning of 1,885. It did not sustainably cross the 1,900 mark until Wednesday afternoon, but then reached its weekly high of 1,923 yesterday afternoon. It starts the European trading day at around 1,914.

Xetra-Gold above 57 € per gram

The Xetra-Gold price also rose and benefited from the weaker euro against the US dollar. From 55.95 € per gram last Friday, it marked the low and high for the week at 55.70 on Monday and 57.00 yesterday. Xetra-Gold was expected to launch into trading this morning at a slightly higher 57.05 due to the now slightly weaker euro.

Gold prices could continue to mirror the development of US bond yields for a while. The speeches by central bank chairs Jerome Powell and Christine Lagarde later today at the Fed symposium might impact price developments. 

I wish all readers a relaxing late summer weekend.

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