Strong US dollar weighs down gold price

Market report Michael Blumenroth – 30.09.2019

Weekly market report

In the absence of ground breaking facts and news, the markets saw two topics move to the centre of attention last week.

On the one hand, the trade conflict between the US and China still dominates the markets, with rumours that the US government was planning to ban the listing of Chinese companies on US stock exchanges at the end of last week. The US Treasury’s denial of the reports on Saturday did not prevent the issue from coming back into focus.

According to news reports yet to be officially confirmed, the US and China may be planning to meet for trade talks in Washington on 10 and 11 October.

Dollar at new two-year high against the euro

Besides the trade conflict, the potential impeachment proceedings against US President Trump dominated last week’s news, which have as yet not directly influenced market movements. Investors did, however, remain on the safe side. They were drawn to the US Dollar, which appreciated against many other currencies, rising up to 1.0905 €/$ on Friday, a new 2 ¼-year high.

A strong US dollar usually means that the price of gold will come under pressure, a rule that was again proven true.

Profit taking on Friday

Gold in US dollars traded around 1,505 $/ounce on Friday morning last week. It climbed to the weekly high of 1,535 $/ounce on Friday afternoon, where it remained until Monday, but dropped to 1,500 $/ounce on Tuesday. It stayed above the 1,500 mark until a wave of selling activity set in on Friday afternoon. Speculative market participants’ positions may simply have grown too large and induced profit-taking sales before the weekend. Gold fell back to 1,487 $/ounce and was still struggling with rising yields this morning. It currently trades at 1,491 $/ounce.

Xetra-Gold slightly stronger week-on-week

The fact that the euro lost one cent against the US dollar last week somewhat supported the price of Xetra-Gold. From 43.75 €/gram on Friday morning ten days ago, Xetra-Gold had climbed to around 44.80 €/gram by Wednesday morning, but was weighed down by the weaker gold price in US dollars. It kicked off trading today at approximately 43.85 €/gram.

This week and especially next week, the US-Chinese trade conflict is likely to dominate headlines.

There will be no further negotiations on tomorrow’s Chinese National Day.

I wish all readers a successful week and will get back to you on Friday.

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