Gold prices just below 1,300 US$/ounce; 18-month high against the euro

04.01.2019 - Market report

created by Michael Blumenroth

Weekly market report

After gold has said a firm farewell to the year 2018, it seems set to remain strong.

A number of market participants are seeking safe havens. Apple shocked stock investors with a profit warning right at the beginning of the New Year, which caused the share price in the US to fall by around eight per cent after the close of trading. Shortly thereafter, the currency markets faced significant turbulence. In the Asian time zone, the Japanese yen rose by approximately 4 per cent against the US dollar within minutes. The yen jumped even more sharply against the Australian dollar and the Turkish lira (up almost nine and ten per cent, respectively). This flash crash unsettled investors, as did the sharp decline in the ISM industrial index in the US, which attracted widespread attention with its suggestion that the local economy is about to cool down.

Declining yields in US government bonds

As a result, further interest rate hikes have not been priced in by the US Fed for this year, but – on the contrary – interest rate cuts have been cautiously priced in for 2019. This led to a significant decline in yields – i.e. market interest rates – on US government bonds. In both the short and long term, these are hardly more attractive than the current interest rates on overnight money in the US. Yesterday, the US dollar lost Wednesday’s gains. These market movements all contributed to the strength of gold, as did yesterday’s weak US stock markets.

US dollar gold price rises

In US dollars, gold traded at 1,272 $/ounce on Thursday morning last week. Since then it has risen fairly steadily to 1,298.50 $/ounce last night. Especially since Wednesday evening, the weak development of the US stock markets and yields provided an additional boost. The most precious of metals currently trades at 1,294 $/ounce, not far from its weekly high.

Xetra-Gold reaches highest price level since June 2017

The euro traded almost two cents weaker against the US dollar on Wednesday, but has recovered by about a cent since then. Xetra-Gold has risen quite considerably from 35.90 €/gram last Thursday morning to 36.50 €/gram this morning, its highest level since June 2017.

Will the New Year mark a comeback for gold?

The gold price will certainly continue to keep an eye on the movements in the stock markets and the development of market interest rates in the US. Gradually, the rising price of gold seems to be luring back major investors who left the gold market in the middle of last year.

I wish all readers a wonderful winter weekend.

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