Seasonal weakness and waiting for Fed decision continues. Has the gold price bottomed out?

Market report Michael Blumenroth – 03.06.2016

Weekly market report

 

The week has brought few new developments, although it kicked off with a bang for gold. Traded at 1,220 US$/ounce last Friday and closing the week at 1,212 US$/ounce, it fell below 1,200 US$/ounce on Monday night – to 1,199.80 US$/ounce, to be precise. The cause seems to have been stop-loss sales by major investors, following a large sell order in the market during a phase of extremely illiquid trading (with London and New York both closed for Monday’s bank holiday). On Monday afternoon, gold had rebounded by US$ 10. Tuesday was the first day of the week to see price gains following nine consecutive days of losses. After the weekly high was reached on Wednesday at 1,220.50 US$/ounce, we have been trading more or less sideways in a relatively narrow trading margin, currently at 1.212 US$/ounce.

Yesterday’s ECB meeting and the OPEC meeting had no significant impact on the market. The dominating question continues to be whether to expect a next key interest rate increase by the Fed this summer. Prospects have remained largely unchanged during the course of the week; with a 55 per cent probability, the market expects an interest rate hike on 27 July. The economic data to be published in the US today, especially the labour market data, might hold a clearer indication of what is in store. In addition, market participants are eagerly awaiting Monday’s speech in Philadelphia by the Chair of the Federal Reserve, Janet Yellen. 

With an increasing focus on the British vote regarding its EU membership on 23 June, nervousness might increase as the date draws closer. The appeal of safe havens might rise accordingly. We will see.
For investors in Xetra-Gold, the receding gold price was somewhat softened by the slightly weaker Euro. From 35.05 €/gram last Friday, it fell to 34.75 €/gram on Monday. By Wednesday, it had reached its weekly high of 35.20 €/gram and currently trades at 34.95 €/gram.

I wish you all a good weekend, hopefully filled with more sunshine and less rain.

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