New luster

While the US markets are expected to remain relatively calm on today’s Thanksgiving holiday, there was still plenty of trading activity in the run-up. Most market segments did not experience dramatic volatility, but overall, market participants appear to be in a risk-taking mood. A series of suboptimal US economic data (consumer confidence, retail sales, etc.) reinforced many traders’ expectations for the Fed to continue its cycle of interest rate cuts in December.

Further Fed interest rate cut on the horizon?

Last week, various Fed speakers expressed their skepticism regarding further monetary easing. Still, this week saw the rise of the dovish policy makers very much in favor of a key interest rate cut on December 10. Last Thursday, expectations for an interest rate cut on December 10 had been factored in at just over 25 percent on the interest rate futures markets, but by this morning, expectations had reached 80 percent. As consumer price data and official labor market statistics will not be released until after the Fed meeting, monetary policymakers will have to make do with the figures currently available.

Gold prices are likely to benefit from an interest rate cut. In addition, expectations of a looser monetary policy are slowing the US dollar, creating a positive mood on the precious metals markets.

Gold in US dollar strengthens week-on-week

While gold traded at 4,070 US$ per ounce last Thursday morning, it dropped to 4,023 on Friday as the markets had already factored in a Fed interest rate cut in December. The mood, however, shifted fundamentally at the beginning of this week. On Monday, the gold price rose by almost exactly 100 US$ per ounce from their day’s low of 4,040 and reached this week’s high (thus far) yesterday at 4,173. This morning, gold was trading at an only slightly lower 4,160 US$ per ounce.

Xetra-Gold also headed North

Xetra-Gold dropped from 113.50 € per gram last Thursday morning to 112.25 at the start of trading on Friday. It strengthened over the course of the week, reaching a high of 116.00 and is likely to start trading at around 115.45 € per gram this morning.

Today’s Thanksgiving holiday will be followed tomorrow by a shorter trading day in the US on Black Friday. Next week marks the start of a new month and the release of several US data from private providers, among them the ISM purchasing managers’ indices, which could give us further insight into the current economic situation in the US.

I wish all readers a wonderful first Advent weekend.