The gold price continues to seek its direction

Market report Michael Blumenroth – 30.11.2018

Weekly market report

This week, we have again seen little movement across the gold markets. Traders with a preference to prices that strongly fluctuate over the course of the day are presently more likely to turn to oil prices, which are quick to react and trade significantly higher or lower depending on the news situation.

US dollar weakens

In the first half of the week, oil prices came under pressure as the US dollar was on the rise against most other currencies. This changed abruptly on Wednesday around 6 p.m., when Jerome Powell, chairman of the Fed, stepped in front of the microphones. He sounded much more sceptical than he had previously on the topic of US interest rate hikes in 2019. In theory, fewer interest rate hikes mean less potential for the US dollar to continue its rally. As a result, the greenback has fallen quite sharply since Wednesday evening, especially against currencies from countries with a high demand for gold such as the Indian rupee and the Turkish lira. In addition, yields/market interest rates on US government bonds also dropped slightly. These factors of course came to support the gold price, but more or less merely made up for Tuesday’s losses.

US dollar gold price recovers slightly

Gold stood at 1,223$/ounce in US dollars on Friday morning last week. As a result of the dollar’s strength at the beginning of the week, the precious metal initially receded to 1,211.50$/ounce on Wednesday afternoon. Following Jerome Powell's speech yesterday, it reached a weekly high of 1,129$/ounce before again crumbling. It currently trades at 1,224 $/ounce, very marginally above the previous week's level and after moving within in a very narrow trading range.

Euro exchange rate stable

The euro dropped against the US dollar, from Friday last week until Powell's speech on Wednesday, but then resurged and has reached roughly the same level as last Friday.

Mini-gain for Xetra-Gold

Xetra-Gold rose from 34.55€/gram last Friday morning to 34.80€/gram on Tuesday morning (due to the euro’s weakness). It then once again dropped to 34.55 €/gram on Wednesday afternoon and 34.60 €/gram this morning – also a gain, albeit small.

Trade conflict remains in focus

The markets are currently eagerly awaiting news from the US and Chinese presidents’ dinner meeting, scheduled for tomorrow evening, hoping for good news on the trade conflict.

I wish all readers a relaxing first Advent weekend.

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