Sluggishness dominates trading week

Market report Michael Blumenroth – 26.05.2017

Weekly market report

With summer fast approaching, the forecasted heat seems to have had a somewhat paralyzing effect on market participants, as did the recent public holidays and speculation on tax and monetary policy and the economic development in the US. 

Speaking of tax policy: news from the US on the topic is mixed and market participants stand perplexed – the thus far published suggestions are all too contradictory. US monetary policy is somewhat more predictable; market participants across the board are expecting a further interest rate increase on 14 June. What is more, the Fed minutes of last Wednesday’s meeting show broad agreement on an approach to start shrinking the balance sheet. This means that markets will in future be provided with less liquidity. Regarding the US economy, we await Data on incoming orders for durable goods later today.

According to experience, the announced Fed measures should have served to support the US dollar and put gold under pressure. Market participants have however remained unimpressed thus far, with the US dollar trading almost unchanged week-on-week, even having somewhat weakened. Against the euro, the dollar again fell to its lowest since October 2016, to 1.1268 on Tuesday, followed by extremely calm markets. 

A similar sluggishness dominated this week’s gold market. From 1,251 US$/ounce last Friday, the gold price climbed to 1,263.50 US$/ounce on Tuesday. Following this weekly high, it fell to 1,248 US$/ounce on Wednesday and has climbed, step by step, to 1,263.50 US$/ounce this morning. That’s a weekly profit of one per cent – not bad at all.

Due to a further strengthening of the euro, the price of Xetra-Gold has marginally dropped since last week, from 36.25 €/gram after a low of 35.95 €/gram and returning to a high of 36.25 €/gram to its current price of 36.20 €/gram.

On its chart, the euro seems to be hitting a point of strong resistance at the mark of 1.14/1.15 against the US dollar. We await the publication of further US economic data later today, but in view of the public holidays in Shanghai, New York and London next Monday, the week is likely to kick off calmly. Later next week, we will take a close look at US employment data and of course at the White House, when Donald Trump is set to return from is first overseas trip as President. 

I wish all our readers a happy and sunny weekend.

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