Slight recovery after three-month low

Market report Michael Blumenroth – 15.11.2019

Weekly market report

The gold price has remained under pressure into the new week, due to the further rise in yields on government bonds and renewed all-time highs for the three key US stock indices.

This was due to the renewed optimism regarding the US-China trade conflict. However, US President Trump was quick to stifle any expectations for a resolution. In a speech to the New York Business Club on Tuesday, he said that a treaty between the US and China might soon be reached, but US tariffs on China imports will be significantly increased should an agreement fail to materialise. Signals from China in recent days have indicated that the country’s willingness to enter a deal depends on the question whether US tariffs on Chinese exports will be abolished or significantly reduced at the same time (an option currently not on the table).

Rising demand for safe havens

Yields on government bonds in the US and Northern European countries dropped, as did the benchmark indices across the European stock markets. Conversely, demand for the previously neglected safe havens yen, franc and gold was on the rise, which in turn nudged gold from its previous three-month low (in US dollars) to almost $30.

Gold slightly lower week-on-week

In US dollars, gold traded around 1,473 $/ounce on Friday morning last week. With the shift to riskier investments, its price fell to 1,446 $/ounce on Tuesday afternoon but rebounded to 1,474.50 $/ounce yesterday evening. Following Trump economic advisor Kudlow’s cautiously optimistic statements about a US trade deal with China tonight, gold retreated slightly. This morning (Friday) it traded just over 1,466 $/ounce.

The euro started the week somewhat weaker against the US dollar, but recovered on Thursday. Xetra-Gold fell from 42.85 €/gram last Friday morning to a weekly low of 42.22 €/gram on Tuesday afternoon, but rebounded to around 43.10 €/gram yesterday. This morning, Xetra-Gold started trading at 42.74 €/gram.

Needless to say, gold is likely to remain under the spell of the US-China trade conflict. If an agreement were to appear on the horizon, the precious metal might face a hard time. It would, however, receive tailwind if the issue drags on and market interest rates/yields remain low.

I wish all readers a relaxing autumn weekend.

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