Slight headwind for gold

It has been somewhat of a stormy week. On my regular training run, I faced a tailwind during the first half and an at times quite strong headwind on the second. The headwinds for gold were moderate, albeit more than just a gentle breeze. In a similar development to oil prices, which dropped to a four-month low over the course of the week, a risk premium, which had built since the beginning of October due to the tense situation in the Middle East, continued to be priced out for gold. Some recent gold investors who had been seeking a safe haven sold some of their positions, with the strengthening of leading US stock indices a likely contributing influence. The S&P500 had extraordinarily risen for eight consecutive days by Wednesday evening.

US yields under pressure

This development was partly due to the US labour market report, published last Friday afternoon, which turned out weaker than analysts had expected in terms of the number of new jobs created, the rise in hourly wages, and the unemployment rate. This caused a further setback in US yields, which was already under pressure following the Fed meeting. While ten-year Treasuries had recently yielded just over 5.0 per cent, yields briefly slipped below the 4.50 per cent mark last Friday.

The futures markets have priced in a first interest rate cut by the Fed in June instead of July 2024. This development, or rather the lower yields, functioned as a safety net for the gold price over the course of the week.

Gold price temporarily above US$2,000

Last Friday morning, gold still traded at 1,988 US$ per ounce in the morning and jumped to 2,004 US$ per ounce and thus above the magic mark of 2,000 immediately following the publication of US labour market data, which turned out disappointing in the eyes of many market observers. By the end of the week, however, gold had dropped to 1,922 and was on its way to 1,945 yesterday morning after the afore mentioned pricing out of the risk premium. A quick intraday recovery to 1,965 followed (possibly spurred on by bargain hunters). Gold in US dollars was expected to kick off the last day of the trading week at around 1,957 US$ per ounce.

The price of Xetra-Gold also came under some pressure during the week. From last Friday’s 60.10 € per gram and the firmer euro/US dollar exchange rate after the publication of US labour market data keeping prices in check, the precious metal slackened to a weekly low of 58.45 yesterday morning. It has since slightly recovered and was expected to start trading firmer around 59.00 € per gram.

The financial markets are now eagerly awaiting the publication of US consumer price data next Tuesday, which are likely to point the markets in the right direction in the short term – especially if they deviate noticeably from the forecasts.  

I wish all readers a pleasant weekend – perhaps with a traditional St Martin’s parade or a celebration of the start of the carnival season.