Weekly market report by gold market expert Michael Blumenroth

Market report 29.04.2016

The commodities rally continues


In the last week of April, commodities were again able post significant gains. Although the weather has remained frosty, the sun has been shining on the commodities markets.

Especially since Wednesday afternoon, commodities prices have been rising, which brings us directly to the “culprit” of this development. Mainly responsible for the gains, also for the rising prices in the most precious of metals, gold, was the Fed. Having tried to keep the interest increase fantasy alive throughout the past weeks, it was, at least in the opinion of most market observers, extinguished on Wednesday. Following the information published after the Fed meeting, the majority of traders seems to have reached the conclusion that an interest rate increase is still far off. Just hours following the Fed meeting, the Bank of Japan failed to meet the expectations of a lower key interest rate. The two elements combined caused pressure on the exchange rates of the US dollar, against almost every other currency. 

As we all know, a weak US dollar usually means rising commodities prices, with gold also depreciating in the domestic currency of demand.

Gold traded 1,246 US$/ounce exactly a week ago and fell to 1,227.50 US$/ounce by the end of the week. At the beginning of the week, it reached 1,240 US$/ounce and picked up further speed following the Fed meeting. Last night, it briefly traded above 1,280 US$/ounce, and as I am writing these lines is still standing firm at 1,277 US$/ounce. 

Xetra-Gold investors also have reason to cheer. While it stood at 35.55 €/gram last Friday and fell to its weekly low of 35.10 €/ounce on Tuesday afternoon, it has yielded a firm weekly gain in spite of the more stable Euro, currently trading at 36.007 €/gram. 

The upward trend for commodities currently seems in full swing. The decisive question will be whether expectations regarding potential Fed key interest rate hikes will change in the near future. Should they remain low and the US dollar weak, commodities will most likely remain en vogue. However, should the US dollar rise, the rally might be put on hold. 

I wish you all a relaxing weekend, a great Walpurgis Night and a successful first week May.

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