Turbulence on the stock markets support gold price

Market report Michael Blumenroth – 26.10.2018

Weekly market report

What we saw suggested last week went on this week: October has once again lived up to its reputation as a difficult month for stock investors. Wednesday in particular saw a US stock market sell-out of the kind we have not seen for quite some time.

Safe havens in demand

Some disappointing operating results, worries about a slowdown in the global economy and the still unresolved worldwide trade conflicts led some investors to pull the emergency brake. This of course in turn supported safe havens such as US government bonds, yen and gold. The slight decline in yields/market interest rates for government bonds of the major industrialised countries also came to support the gold prices. On the other hand, the gold rally was dampened by the unperturbed strength of the US dollar. In addition, equity markets recovered somewhat on Thursday after coming under heavy pressure around the world on Wednesday. However, Asian markets weakened this morning as investors showed disappointment over the quarterly results published by Amazon and Alphabet.

Gold in US dollars rises slightly

In US dollars, gold traded at 1,225 $/ounce on Friday morning last week and fell to 1,220 $/ounce at the start of the week on Monday. Amid the weak stock markets, however, gold climbed to its weekly high of 1,239.75 $/ounce on Tuesday. It was, perhaps, somewhat surprising that the precious metal was unable to benefit from the further decline in stock prices on Wednesday and fell to 1,227 $/ounce, most likely a general tendency of investors to liquidate positions. Yesterday, gold rose to 1,239 $/ounce but failed to stabilise. It receded below the $1,230/ounce mark and currently trades at 1,232 $/ounce.

Xetra-Gold picks up speed

The euro this week continued to depreciate against the US dollar. The gold price in euro thus rose even more sharply, and Xetra-Gold climbed almost continuously from 34.45 €/gram last Friday morning (after a Monday setback to 34.15 €/gram) to 34.85 €/gram before the start of trading this morning.

Focus remains on stock markets, US dollar

Investors will continue to look at the stock markets and the US dollar in the coming days to form their opinion about the gold price. At the moment, the safe haven argument still seems to be en vogue.

I wish all readers a happy weekend. 

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