Weekly market report by gold market expert Michael Blumenroth

Market report 24.03.2016

Profit taking, the Fed and a strong US dollar weigh down on gold


Following a number of joyous weeks for gold investors, the current week seems to be ending on a somewhat more difficult note. This is due to a number of reasons:

First of all, we should not lose sight of the fact that the US dollar gold price climbed by approximately 20 per cent from the beginning of the year to its yearly high. This fact, together with the upcoming long Easter weekend, seems to have sparked a profit taking reflex, also in face of the US leading share indices having climbed to new yearly highs. Secondly, the Fed had made the surprising statement that, according to a majority of decision makers, there would be merely two interest rate increases in what remains of 2016. The statement was thwarted somewhat afterwards, as a number of open market committee members of the Fed announced an intended interest rate increase for as early as April (even if the Markets are not quite taking the statement at face value). This somewhat more “falcon-like” performance by Fed members caused the US dollar to rise against a majority of other currencies during the course of the week, a development that again did not prove conductive for the development of the gold price.

A number of adverse factors thus came together, causing the gold price in US dollars to depreciate from 1,260 US$/ounce last week to 1,212 US$/ounce this morning. It currently trades at 1,217 US$/ounce.

As the euro also experienced a setback against the US dollar, weekly losses for Xetra-Gold investors have been somewhat attenuated. From €36.00 €/gram a week ago, it fell to 34.95 €/gram before rebounding to its current level of 35 €/gram.

Nevertheless, gold has proved THE investment of the first quarter, an assessment we will further discuss and again verify next week. Over the next few days, the US is due to publish various economic data, but the market is most eagerly awaiting the next US labour market report and the ISM Manufacturing Index to be published next week Friday.

I wish you all a happy and peaceful long Easter weekend.

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