Slight profits in a week dominated by central banks

Market report Michael Blumenroth – 15.12.2017

Weekly market report

Even though the looming US tax reform will be at the focus of market participants’ attention throughout the next days, the past week has offered up some diversion with a number of central bank meetings.

Yesterday’s ECB meeting was uneventful – one of this morning’s commentaries referred to it as a Dinner for One sketch: same procedure, every time. The strong European economy seems to have remained unnoticed within the ECB tower, and interest rates are likely to remain unchanged through 2019.

The Fed, however, painted an entirely different picture. As announced at the beginning of the year, it followed through with its third interest rate hike in 2017, and announced the possibility of a further three for 2018. A number of market participants had, however, anticipated a slightly more aggressive course on the monetary policy of the next years. With the US labour market brimming at full employment and inflation rates nearing the target of 2 per cent, the tax reform should further boost US economy. Hence, US market interest/returns slumped, as did the US dollar during the last press conference held by Janet Yellen as Fed chair. On the day of the Fed meeting, the US dollar index DXY fell by a whopping .75 per cent. 

This, as often is the case, gave a jump start to the gold price. While it traded at 1,249 US$/ounce last Friday, it afterwardsfell to its lowest point since July, hitting 1,237 US$/ounce. Prior to the Fed meeting, it rebounded to 1,245 US$/ounce before climbing to its weekly high of 1,259 US$/ounce after the meeting. A firmer US dollar caused gold to drop slightly, and it currently trades at 1,257 US$/ounce. 

In euro, gold also showed a slight upward movement this week. From last Friday’s price of 34.20 €/gram, it initially fell to 33.90 €/gram before continually rising to 34.35 €/gram and its current price of 34.30 €/gram. 

Next week, all eyes will be on the question of whether the US tax reform will be passed before Christmas. Other than that, things will remain calm in anticipation of the holidays if traders close their books for 2017. Time for a good movie, maybe Star Wars 8: the last Jedi. May the force again be with gold.  

I would like to wish all our readers an enjoyable weekend and a good start into the last week before the Christmas.

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