Spring is in the air on the gold market

Market report Michael Blumenroth – 24.03.2017

Weekly market report

It has been another successful week for gold investors, due to similar reasons as in the week prior. Market participants continue to doubt the sincerity of the Federal Reserve’s intention of “aggressively” increasing the key interest rate. This caused the returns of ten-year US government bonds, which stood at 2.63 per cent at their highest last week, to drop to 2.37 per cent. And the rule of thumb is: the lower the returns, the higher the gold price.  

Traded at 1,228 US$/ounce exactly a week ago, gold moved upward, contrary to the development of the declining returns in the US, and reached 1,253 US$/ounce yesterday afternoon. This development was aided by the continuously weakening US dollar against a number of producing countries’ currencies, such as the South African rand. After profit taking and due to slightly higher US returns, gold currently trades at a slightly weaker 1,244 US$/ounce, which is still a sound weekly profit.  

Eurozone investors saw a similarly favourable development, with a weekly gain of more than one per cent. From 36.70 €/gram last Friday, Xetra-Gold rose to 37.36 €/gram yesterday afternoon and started trading this morning at a slightly lower 37.10 €/gram.  

Today, all eyes will be on the US House of Representatives’ vote on the new healthcare bill. Its potential impact on the financial markets: participants see it as a test as to whether President Trump will be able to reach his economic policy objectives. The general market sentiment is that a postponement of the new health care bill means a postponement of tax reliefs. Which in turn could cause the dissolution of a number of so-called Trump trades and raise the pressure on the US dollar and the stock markets. However, the markets expect that the bill will be passed today.  

I wish all our readers a relaxing and sunny spring weekend.

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