On hold

Back from my vacation, I am somewhat surprised to find the gold price has not moved dramatically since my last report. However, this does not indicate the markets going into early hibernation, as volatility remains pronounced, with daily, at times significant, fluctuations.

Drivers of the gold price

The main negative factor was the press conference following the Fed meeting at the end of October, during which Fed Chairman Jerome Powell explicitly stated that another Fed interest rate cut in December was by no means a foregone conclusion. While the interest rate futures markets had previously priced in another rate cut on December 10, they more recently estimated that probability at only around 45 percent – and following the publication of yesterday’s meeting minutes, at just above 25 percent. This created small headwinds for gold, as did the slightly stronger US dollar.

US shutdown delays publication of data

Uncertainty is also caused by the fact that no data on the positioning of speculative market participants in the US has been published for two months due to the US government agencies’ shutdown. If positioned extremely one-sidedly toward the buy side, significant further selling pressure could ensue following profit-taking and possible follow-up sales.

Gold remains in demand as stabilizer

On the other hand, many indicators point to gold remaining in demand as a safe haven. The recent setback on the stock markets shows that even these are not a consistently one-way street of rising prices. (Geo)political risks and the sharp increase in government debt around the globe have also taken root in the minds of many investors. The focus is currently on Japan, with a noticeable depreciation of the yen and losses across bond markets.

Gold currently above 4,000 US$ per ounce

While gold still traded at 3,996 US$ per ounce Wednesday morning three weeks ago at the time of our last report, they dropped to 3,915 US$ on October 30. Following several days of sideways trading around the 4,000 US$ per ounce mark, the gold price decided to take the bull by the horns, jumping from around 4,000 to 4,225 on November 13, but had given up all gains by Tuesday of this week. The precious metal recovered to 4,132 US$ per ounce yesterday, Wednesday, and traded around 4,070 as of 8:00 this morning (Thursday).

Xetra-Gold also sees impressive volatility

Xetra-Gold dropped from 110.40 € per gram on Wednesday morning three weeks ago to 109.65 and jumped to 117.45 € between November 10 and 13. After a setback to 111.50 earlier this week Tuesday, Xetra-Gold was expected to start trading today at around 113.50.

Today will also see the publication of US labor market data for September, likely to cause somewhat stronger market movements, at least temporarily. Early next week, further US economic data is set to be published before the next Fed meeting takes place on December 10 – pre-Christmas hustle and bustle. Overall, the gold price corrections appear to have been healthy, leaving many fundamental reasons for renewed upside potential in the medium term.

I wish all readers a great weekend.