The ‘gold rush’ continues

To quote Goethe’s Faust and set the mood: ‘To gold still tends, On gold depends. All! All!’ Not for an intellectual touch, but because it sums up the last few days on the gold market quite well. After a brief respite last Friday, gold prices have soared since Monday, delighting investors with daily record highs.

Rising above 4,200 US$ per ounce

Last week, we commented on the jump above the 4,000 US$ per ounce mark, and yesterday, gold surmounted the hurdle of 4,200.

US-China trade dispute enters next round

Gold prices had received a boost at the end of last week following Trump’s announcement of potential import tariffs of 100 per cent on goods from China as of 1 November alongside plans to examine export restrictions on chips and semiconductors to China. This was in response to China’s announcement of tighter export controls on rare earths from 1 November. The trade conflict – particularly between the US and China – had recently been considered by many market players as de-escalated. Considerable irritation ensued on Friday evening CET. US stock indices plummeted and boosted gold prices.

Fed Chair hints at interest rate cut

Although Trump struck a much more conciliatory tone on his social media channel on Sunday, gold prices rose to above 4,100 US$ per ounce for the first time on Monday. A speech by Fed Chairman Jerome Powell on Tuesday sparked expectations of a further interest rate cut, to be announced at the Fed meeting in two weeks’ time. This, in turn, provided additional strong tailwinds for the gold price.

New record high

While gold traded at 4,038 US$ per ounce last Thursday morning, it dropped to 3,945 within the same day after profit-taking. On Friday, gold rose back above the 4,000 mark and gained traction. On Tuesday, a brief setback sent gold in US dollars from around 4,180 to 4,090 – although this may have been influenced by a sharp, albeit very short-term, correction in silver prices after the latter had also reached a record high. Gold quickly recovered and reached a further record high yesterday at 4,218 US$ per ounce, topped by 4,242 early this morning and started trading in Europe at around 4,232 US$ per ounce.

The Xetra-Gold price also broke records. It dropped from 111.60 € per gram last Thursday morning to 109.80 at the start of trading on Friday. From the beginning of the week, it has jumped from one record high to another, with the current level of 116.50 achieved yesterday morning. If the price at 7:00 holds until the start of trading, Xetra-Gold will start trading today at around 116.70 € per gram – another record high.

Price correction or continued rally?

The gold market currently appears to be somewhat overbought, and a pause or small correction before the resumption of the frenzy might be healthy for the market. As long as demand meets insufficient supply, prices will continue to rise from a purely economic perspective. Profit-taking – especially by speculative investors on the futures exchanges – is, of course, still possible at any time. In the current market environment, however, investors seem to view short-term setbacks as buying opportunities.

I wish all our readers a golden October weekend.