Volatility continues

Following yesterday’s German Father’s Day, some market participants may now be tempted to reduce their positions somewhat in the run-up to the many holidays around the globe next week (Monday in the US, Thursday and Friday in the UK) and the approaching end of the month. This may have already happened over the course of this week, as some of the week’s early market movements have been levelled out again.

Week starts with tailwind for gold and euro

On the stock exchanges, technology shares were again hit particularly hard at the beginning of the week after a company in the social media sector warned of a drop in profits for the second quarter, which caused the price of the share in question to decline by more than one third. Ongoing inflation, interest rate and recession fears weighed on US markets in particular. The gold price benefited from this development in the first half of the week. The lagging capital market interest rates in the US and the somewhat weakening US dollar also supported the most precious of all metals. The euro, in turn, benefited from a blog post by ECB President Christine Lagarde, in which she for the first time specifically expressed the view that an interest rate hike in July would be just as appropriate as an end to the negative interest rates on deposits at the end of the third quarter. As a consequence, markets priced in four deposit rate hikes of 0.25 percentage points each by the end of the year, which in turn boosted the euro.

Midweek: Stock markets rise, gold drops

The minutes of the last Fed meeting, published on Wednesday evening, did not give any indication of possibly more aggressive US interest rate hikes than currently priced in. On the contrary, some traders interpreted them as a somewhat more cautious approach for the second half of the year. The stock markets took note and saw significant gains on Wednesday and Thursday. Long positions in gold, on the other hand, were lowered.

Gold slightly higher in US dollars, weaker in euros week-on-week 

The gold price was 1,846 US$ per ounce Friday morning last week. After a setback to 1,833 on Friday afternoon, it climbed to its weekly high of 1,870 by Tuesday afternoon but dropped to 1,845 yesterday as stock prices recovered. This morning at 7 a.m., gold traded at a slightly higher 1,854.

Xetra-Gold buckled under the appreciation of the euro; trading at 56.10 € per gram on Friday and at a weekly high of 56.35 on Monday, the euro caused a price drop to 55.20 yesterday. This morning, Xetra-Gold (as of 7 a.m.) was expected to start trading at around 55.40.

Capital market interest rates and the US dollar exchange rate will continue to influence gold prices. The data highlight of the coming week will likely be the US labour market report on Friday. However, liquidity could be somewhat modest due to the holidays.

I wish all readers a happy and sunny weekend.