Signs of stabilisation

Despite occasional, short-term setbacks below US$2,500, gold seems to be resting up comfortably above that mark (which, if it were an apartment, would be well on its way to being decorated and furnished for the long term...).

Especially on Friday, gold prices sailed on a tailwind. At the annual Fed symposium in Jackson Hole, Wyoming, Fed Governor Jerome Powell cemented the US central bank’s impending interest rate turnaround, signalling an upcoming key interest rate cut to avert a further weakening of the US labor market. As a further cooling of the labor market is undesirable, Powell stated that the time has come to adjust monetary policy. Inflation is down significantly, while it is, at the same time, imperative to do everything possible to avoid a sharp rise in unemployment.

Fed signals interest rate turnaround

While Powell said that the amount and sequence of further interest rate hikes have not been set, the first key interest rate cut will likely occur on 18 September. It is therefore firmly priced in on the markets. The financial markets’ reactions to the statements were favourable; prices of US government bonds rose while yields on two-year US Treasuries dropped noticeably. The US dollar came under pressure and hit a 13-month low against the euro on Monday morning at around 1.12 US$ per €.

Gold, which pays neither interest nor dividends, is likely to benefit from the key interest rate cuts, although already firmly priced in on the futures markets. The week has thus far had very few data points that could have moved the markets. Things are, however, about to change – I promise.

Gold remains above 2,500 US$ per ounce

Last Thursday morning, gold traded at 2,502 per ounce. Following profit-taking ahead of Jerome Powell’s speech, it dropped to 2,471 intraday but recovered to 2,516 per ounce on Friday following his speech. Yesterday morning, at 2,529 US$ per ounce, it missed the record high by just under 3 US$. After a brief setback to 2,493 yesterday afternoon, the precious metal kicked off European trading this morning at 8:00 at around 2,519 US$ per ounce.

Upward trend for Xetra-Gold

The Xetra-Gold price also rose moderately week on week, although the euro continued to appreciate against the US dollar and slowed things down somewhat. Xetra-Gold initially rose from 72.20 € per gram on Thursday morning last week to 72.80 on Monday afternoon. After two slight setbacks to 72.20, it was expected to start the European trading day slightly higher at around 72.70 € per gram.

Tomorrow will see the publication of inflation data for the Eurozone and the US, which might somewhat move the markets. Next week will be off to a slow start in the US with Labor Day. We are thus eagerly awaiting the US labor market report, to be published next Friday.

I wish all readers a sunny and relaxing late summer weekend.