Gold prices defy jumps in yields

After being under pressure for most of the past two weeks, gold prices have thus far gained almost three per cent this week. This is most likely due to investors’ yearning for safe havens in the aftermath of the tragic events in the Middle East. In addition to gold, government bonds were therefore also in demand. Rising bond prices mean falling yields, which in turn also gave gold prices a tailwind.

US treasury yields guided by interest rate outlook and consumer prices

The decline in yields on long-term US government bonds was particularly significant. From 4.97 per cent, 30-year US Treasuries dropped to 4.67 per cent yesterday afternoon, and ten-year Treasuries went from 4.80 to 4.52 per cent. This development was also a reaction to Fed representatives’ statements to the effect that the Fed would probably not have to raise key interest rates further due to the high level of yields. Yesterday afternoon, however, we saw a countermovement following the publication of US consumer price data for September, which turned out slightly above the average expectation. US Treasury yields rose noticeably, but had no lasting impact on gold prices, which remained unchanged from the previous day. 

A look back at the week’s gold prices in US dollar and euro

Last Friday, gold was still trading at 1,824 US$ per ounce and hit at a six-month low of 1,811 in the afternoon following the publication of US labour market data. After closing the week at 1,831, the precious metal kicked off the new week around US$15 higher. Just before the publication of US inflation data yesterday, it reached a weekly high of 1,885, but then dropped by around US$15. This morning, gold started the trading day at around 1,876 US$ per ounce.

The Xetra-Gold price was also up, from 55.60 € per gram during regular trading hours last Friday to 56.50 at the opening of trading on Monday. It worked its way up to 57.10 yesterday just before the release of US inflation data. Xetra-Gold was expected to start this morning’s trading slightly firmer at just under 57.30 € per gram.

Due to the geopolitical situation, gold is likely to remain in demand as a safe haven and investors will remain attentive towards the development of yields and central banks’ monetary policy.

I wish all readers a last beautiful summer day today and a relaxing autumnal weekend.