Tailwind

Due to scheduling reasons, I am reporting on Wednesday morning, 20 May, which at least allows me to announce a robust gain for followers of the precious metal since the previous report, published last Thursday.

The fact that there is no market-moving news on the trade conflict may be a good sign if serious negotiations are to take place quietly without media coverage. However, the question of the extent to which the US government plans to fund its planned tax cuts through spending cuts has once again become an issue. Over the weekend, several Republicans who had previously opposed the tax package expressed their willingness to support it after all. According to calculations by independent US budget policymakers, the package is likely to add trillions of dollars to the already high US national debt, with Friday evening seeing a downgrade of US national debt by a rating agency.

Rising US government debt and rating downgrade weigh on US dollar

In response, US government bond yields rose noticeably on Monday, and the US dollar also weakened moderately. Although the markets calmed over the course of the day, the US dollar remained on the defensive.

Gold buying positions on US futures exchanges were further reduced last week and thus remain at their lowest level in 14 months. However, continued strong demand from China could provide support in the medium term. Although China saw positions in gold ETCs slightly down in recent days, long positions on Chinese futures exchanges continued to rise, as did the premium for physical precious metal bars.

Overall, gold prices recovered robustly in recent days from the sharp setback of the previous week. Last Thursday morning, gold traded at 3,130 US$ per ounce and had risen to 3,240 by the evening. Friday brought a setback below the 3,200 mark, but gold gained momentum yesterday, reaching 3,285 US$ per ounce and then 3,314 overnight, and kicking off European trading this morning at 7:00 at around 3,300 US$ per ounce.

Xetra-Gold trades above 90 € per gram

The Xetra-Gold price also made a strong recovery, rising from 89.90 € per gram last Thursday morning to 93.85 yesterday afternoon. If the 7:00 level holds, Xetra-Gold will start the European trading today at around 93.70 € per gram.

Developments in the trade dispute and regarding the US tax package should remain the focus of the markets, especially as the package could be put to a vote in Congress before the Memorial Day holiday on Monday. The purchasing managers’ indices for the eurozone could also be of interest. They are closely watched leading indicators and due for publication on Thursday.

And finally, in my own interest, I wish all readers a pollen-free weekend.