Resilience

The gold markets are far from getting boring. While gold prices have not reached a record high in the past three days, they are not too far away and therefore considerably higher than last Thursday. Notably, the market environment did not in the slightest seem favourable for a further rise in gold prices; on the contrary, the higher-than-expected US inflation in March had an impact. Yields on US Treasuries climbed to their highest level since November – above the 5.00 per cent mark for two-year maturities and up to 4.69 per cent for ten-year bonds. And that was not all. The US dollar also appreciated further, reaching its highest level since November 2023 – both against the euro and an index including the other G10 currencies.

US inflation remains stubborn

On Tuesday, Fed Governor Powell expressed his disappointment in the March inflation trend and that the monetary authorities were in no hurry to lower the key interest rate. Yields/capital market interest rates and the gold price usually move in opposite directions – if yields rise, the gold price falls and vice versa. However, this has not been the case so far this week.

Profit-taking slows down gold price

Gold prices made a spectacular move last Friday. Sought a safe haven until late in the afternoon, many market players wanted to hedge against an expected escalation in the Middle East over the weekend following advance announcements by Iran. In the final hours of trading on Friday, however, gold prices lost a good 90 US$ per ounce after some market participants apparently took profits ahead of the weekend and reports of a presumably rather “limited extent” of the escalation were reported.

Gold above previous week’s level

Last Thursday, the precious metal traded at 2,340 US$ per ounce, but continued to rise inexorably until Friday afternoon, reaching a new record high of 2,431.50. As mentioned, there was then a setback to 2,333 on Friday evening and the weekly low of 2,324.50 was reached Monday afternoon. Prices have since risen again, reaching 2,398 – before retreating somewhat yesterday evening. Today, Thursday, European trading at around 7:00 was expected to kick off at 2,375 US$ per ounce – once again slightly higher than last Thursday.

In euros, gold reached 2,286.50 € per ounce yesterday – also a new record high – and had climbed from 70.00 € per gram last Thursday morning to an all-time high of 73.45 by Friday afternoon. Who would have thought this possible in early March or April? This morning, Xetra-Gold was expected to start the day at around 71.55, also on an upward trend which has continued for several weeks. 
In addition to next week’s release of the US core PCE rate (the Fed’s preferred inflation measure), there are few very market-relevant data scheduled for publication in the coming days. 
It seems that these are currently only playing second fiddle to gold prices anyway. Our closing words from the previous week therefore remain valid: although setbacks due to profit-taking are to be expected at any time, gold should have further upside potential in the medium term, with demand remaining strong.

I wish all readers a golden weekend.