Rise in yields puts brakes on gold

Market report Michael Blumenroth – 17.09.2021

Weekly Market Report

The highlight of the past week was certainly the ECB meeting, particularly relevant for the markets, as some members of the Monetary Policy Committee had said in advance that the time had come to scale back bond purchases due to economic recovery in the eurozone. In particular, the eurozone markets trading government bonds reacted in the run-up to the meeting. Capital market rates for long maturities rose significantly from their summer lows. Admittedly, the ECB then stressed that it would stick to its highly expansionary monetary policy for a while longer. The markets have, however, already made their judgement: the ECB will (have to) reduce its bond purchases in the foreseeable future. Even after the ECB meeting, yields therefore continue to rise, for ten-year Bunds from minus 0.5 per cent to currently minus 0.3 per cent.

US dollar supported by US economic data

Consumer price data from the US were eagerly awaited this week, with the inflation rate declining slightly from 5.4 to 5.3 per cent. However, this is of course still a figure well above the Fed target. The Fed is expected to start scaling back its monetary support at the end of the year, which as a rule tends to support the US dollar. Some surprisingly sound US economic data – such as retail sales, published yesterday – also served to somewhat boost the US dollar.

Rising capital market interest rates and a more robust US dollar is a mixture that usually does not bode well for the gold price. The effects of this rule were apparent this week, which we unfortunately cannot keep quiet about at this point: the leaves are starting to fall, and so did this week’s gold price.

Gold in US dollars hovers near 1,800 mark

A fortnight ago on Friday, gold initially climbed from 1,812 US dollars per ounce in the morning to 1,834 in the afternoon – at that point, all seemed well with the world. Until Wednesday of this week, gold prices then bobbed along in a kind of premature winter dormancy within sight of the 1,800 mark, which was no mean feat as yields continued to rise. Delicate natures should perhaps not read on at this point. Yesterday (Thursday), the gold price dropped from 1,795 to 1,745 US dollars, recovering only slightly to 1,755 by the end of the day.

Xetra-Gold slightly weaker week-on-week

The Xetra-Gold price was unable to escape the downward pull. Within regular trading hours, it declined from 49.05 € per gram last Friday and 49.65 in the afternoon to 49.00 on the same day, initially settling into a trading range of 49.00 to 48.50 for the next few days. Yesterday, it slipped to 47.80 before ending the day at exactly 48.00.

Next week, various central banks will meet for the first time after the summer break. The focus will be on the Fed meeting on Wednesday evening. Gold prices could gradually use some support in the form of falling yields. 

I wish all readers a happy and relaxing weekend..

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