Weekly market report by gold market expert Michael Blumenroth

Any investor betting on gold yielding its largest quarterly profits since 1986 in the first quarter of 2016 at the beginning of the year would most likely have either been laughed at by British bookmakers – or else given an extremely good rate. The precious metal presented itself as too weak in December 2015 and it seemed all too likely that the stock markets held higher profit opportunities.

But things turned out differently: from 1.060 US$/ounce at the beginning of the year, gold climbed by 16.5 per cent to just over 1,230 US$/ounce. Although it was unable to defend its yearly high of 1,284 US$/ounce – reached on 11 March – it remained steadfast. Let us keep in mind that during the course of the week, the Dow Jones Index as well as the S&P500 in the US reached annual highs. The need for security, for example in seeking a safe haven, no longer seems evident. 

The week once again saw Janet Yellen lending a helping hand to gold. The Fed Chairwoman’s speech on Tuesday was understood by market observers to indicate that further interest rate increases by the Fed in the near future are highly improbable. The US dollar accordingly came under massive pressure and depreciated against all other currencies, a fact which the precious metal gold at first profited from. It rose from 1,217 US$/ounce last Friday and its weekly low of 1,209 US$/ounce in Far Eastern trading on Easter Monday to 1,244 US$/ounce. This development, however, was followed by profit taking on Wednesday and Thursday, as a number of major investors, in an apparent effort to secure their profits at the quarter-end, sold their gold positions. At the moment of my writing this commentary, gold trades at 1,234 US$/ounce – supported by investors irritated by the 3.5 per cent slump of the Japanese Nikkei Index last night. Generally speaking, demand for gold products in Germany remains on an exceptionally high level. 

A small drop of bitterness remains: the fact that the US dollar is currently retreating also has an effect on the price of Xetra-Gold. Following Janet Yellen’s speech, the euro significantly rose, in turn causing the price of Xetra-Gold to trade below its levels of last week. It fell from 35.10 €/gram to 34.77 €/gram and currently trades at 34.85 €/gram.Unfortunately, I am unable to look into the future, but for an entire year, the euro has had a hard time as soon as the 1.15 mark is anywhere near. On the chart, we are moving in a major resistance zone, which could mean that the euro, should it remain unable to break through, will be weakening again soon. The market is eagerly awaiting today’s US labour market data, which might bring us insight regarding the next movements of the euro against the US dollar.

I wish you all a sunny spring weekend.