US dollar continues its upward trend

Market report Michael Blumenroth – 03.05.2018

Weekly market report

The week (as at Thursday morning) again has market participants surprised by a smooth-sailing US dollar. The USD-DXY index has climbed to its highest level since the beginning of the year, while the euro against the US dollar has fallen to its lowest level since 9 January (1.1938 €/$). The firm US dollar caused gold to drop to its lowest level since January while still defending the 1,300 $/ounce mark.

Focus on interest rate differentials in US and eurozone

Commentators believe that traders are currently concentrating on the growing rate differential between the US and other industrial nations. Similarly contrary, of course, are the interest rate differentials and respective expectations regarding key interest rate hikes in the US and the eurozone. While the US continues to expect two to three increases in 2018, market observers for the EU expect the next hike in summer 2019, earliest. It seems somewhat strange that the interest rate difference in 2017 had no influence whatsoever on the US dollar conversion rate, while it currently is the most decisive factor in the matter.

Week-on-week development 

In any case, a strong US dollar has never been one to boost the gold price. While on Friday morning last week gold held a steadfast 1,317$/ounce and even traded at 1,325 $/ounce at the beginning of this week, it dropped continuously until Tuesday, to 1,302 $/ounce. Following the slightly unclear Fed message yesterday evening, gold did rebound to 1,313 $/ounce and currently (Thursday morning) trades only slightly lower, at 1,310 $/ounce. 

The gold price in euro has been more stable, due to the fact that the drop of the euro against the US dollar again was more significant than that of gold against the US dollar. From 35.07 €/gram last Friday morning, Xetra-Gold rose to 35.18 €/gram within the same day. Following a weekly low of 34.90 €/gram on Monday morning, the price of gold in euro per gram rebounded slightly and is currently 35.12 €/gram.

Uncertainty continues

The next days will most likely see the gold price continue to be influenced by the development of the US dollar, especially against the gold producing countries’ currencies and the euro. Analysts are currently in disagreement as to which direction this will lead the precious metal to take.  

Next Tuesday, we invite you to join us for the oline seminar (held in German) “Xetra-Gold – Gold: currency, commodity or asset class?” I will comment on current developments on the gold market in my capacity as Deutsche Bank gold market expert. Participants will also have the opportunity to ask direct questions.

I wish all our readers a wonderful spring weekend.  

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