Weekly market report by gold market expert Michael Blumenroth

This week has been a tale of two halves. Until Tuesday, the US dollar was in the dumps, having posted a seven-day decline not only versus the “big” currencies, but also against many commodity and emerging markets currencies. As a result, gold, silver, platinum and palladium climbed to their highest levels in several months. Gold, which around this time last week was still trading at 1,277 US$/ounce, advanced to 1,303.80 US$/ounce on Monday, the highest since January 2015 (in US dollar terms). On Tuesday, gold again rose above 1,300 US$/ounce – before the US dollar started its great rally.  

Furthermore, the Australian central bank lowered interest rates in a surprise move, pushing the Australian dollar and several other commodity currencies (rand, Canadian dollar and yuan) significantly lower. Around the world, commodities are traded in US dollar, which means that the weaker the respective country’s currency against the US dollar, the higher the earnings potential for the domestic commodities producers. In parallel to the US dollar strengthening, a new bout of risk aversion also emerged, as demonstrated by weaker equity markets. (The motto “Sell in May and go away” featured in news reports almost every hour.) In a risk averse market environment, commodities tend to move lower, which was proven this week by the decline in copper and other base metals well as as oil.

Compared to these, gold held up pretty well. The most precious of all metals declined to 1,269 US$/ounce yesterday evening, before recovering and trading at 1,279.50 US$/ounce at the time of writing. This is marginally higher than at the same time last week.

The euro climbed from 1.1380 last Friday to 1.1616 on Tuesday – a nine-month high. The currency has since moved back down to 1.1420. For investors in Xetra-Gold this means that its value rose from 36.00 €/gram on Friday to 36.50 €/gram on Monday. Due to the slight increase in the euro and the decline of gold (in US dollar), Xetra-Gold is now trading at last Friday’s level of 36.00 €/gram, demonstrating relative strength compared to copper, zinc, aluminium, oil and Co.

This afternoon will see the publication of US labour market data, which may move markets if there will be significant divergence from the consensus estimate of 200 t new jobs created.

Next Friday, the author of this text will attend a seminar. However, he will make his best effort to write a market report. 

Wishing all readers a sunny weekend and a successful new week.