Gold prices remains under pressure

It may read boring and perhaps annoying – a bit like a broken record. This week, again, the markets were dominated by the theme of strong movements in the bond markets, which spilled over into all other financial markets. By midweek, it seemed as if there would be no stopping government bond yields. Ten-year US Treasury yields climbed to 4.88 per cent and 30-year yields to 5.01 per cent – levels last seen in 2007. Ten-year Bunds peaked at a ten-year high of 3.02 per cent, all triggered by fresh US economic data which exceeded analysts’ expectations. In particular, the strong increase in the number of job openings in the private sector in August raised expectations (and for some, fears) on the markets that the US Federal Reserve could once again raise interest rates or keep its monetary policy at a very restrictive level in the medium term.

US Dollar Index at one-year high

Yield movements in the US led the way for other markets this week. The US dollar rose alongside rising yields, up not only against the euro but also in the form of the trade-weighted US dollar index, reaching a new high for the year midweek. Furthermore, commodity prices came under pressure, with precious as well as industrial metals hitting multi-month lows. 

In the end, the gold price thus returned to the level at which it had kicked off the year 2023. A small consolation: Both the prices of the other precious metals and the six industrial metals traded on the London Metal Exchange have dropped – many of them significantly – since the start of the year. 

Gold price development in US dollars and euros

Last Friday morning, gold traded at 1,870 US$ per ounce. After rising to 1,880 on Friday afternoon, US dollar gold prices have been steadily declining. At 1,813 yesterday, it traded at the low levels it had last seen in March. This morning, gold started the European trading day at around 1,824 – almost exactly the first price at which it started the year 2023.

The Xetra-Gold price also went south over the course of the week but remains above its price at the start of the year. Friday three weeks ago, Xetra-Gold traded at 56.75 € per gram, and after a brief jump to 56.95, it moved steadily downwards – to around 55.45 yesterday. Xetra-Gold was expected to start trading this morning at a somewhat firmer 55.60.

Developments in the bond markets should guide the other markets for the time being. This afternoon, US labour market data – especially if it turns out to be far from expectations – could cause some volatility. Next Thursday, US consumer price data will provide another piece of the puzzle regarding the Fed’s monetary policy. 

I wish all readers another sunny weekend – maybe there’s a golden October on the horizon?