Strong first quarter

Market report Michael Blumenroth – 01.04.2022

Weekly Market Report

Considering that gold prices were facing strong headwinds from capital market interest rates which have been rising at an almost historic rate, the results for the first quarter are quite respectable. While gold failed at defending the annual high of 2,070 US$ per ounce (equivalent to roughly 1,900 € per ounce), reached on 7 March, a gain of about six per cent in US dollars and eight per cent in euros can certainly be called decent in this environment.

Upswing for government bonds

Once again, events were dominated by the bond markets. The first upward push in yields was triggered on Tuesday by delicate hopes of a possible de-escalation in the Russia-Ukraine war after the negotiations in Istanbul. Capital market interest rates received a further boost from the significantly higher-than-expected inflation data from Spain (9.8 per cent!) and Germany (7.6 per cent, according to the European calculation method). For the first time since December 2014, two-year German Bunds briefly yielded positively, ten-year Bunds peaked at just under 0.73 per cent, and ten-year US Treasuries at 2.55 per cent, both also at multi-year highs.

Gold prices slightly down week on week

Over the course of the week, yields retreated somewhat, partly due to oil prices, which eased after the US government’s decision to sell around one million barrels of oil per day from its strategic reserves over the next 180 days. This resulted in somewhat lower inflation expectations. This morning, however, we again saw slightly rising yields, which in turn dampened gold prices.

Gold traded at 1,957 US$ per ounce last Friday morning and briefly retreated from 1,930 to 1,890 on Tuesday, on the back of hopes for a de-escalation of the Russia-Ukraine war and rising yields. They recovered rapidly to 1,950 yesterday afternoon and traded slightly lower this morning, at 1,932.

The Xetra-Gold price also lost moderately week-on-week, from 57.10 € per gram at the end of last week to 54.65 on Tuesday. Following a sharp rise to 56.35 yesterday afternoon, Xetra-Gold started trading this morning at 56.20.

What’s ahead in the second quarter?

With the new quarter, the cards are being reshuffled. Later today, the US will report its March labour market data. The markets will likely remain focused on developments surrounding the Russia-Ukraine war and the strong movements across the bond markets.

I wish all readers a happy weekend.

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