On hold

We started this week at a leisurely pace with Monday’s public holidays in London and New York. As is usual on double holidays such as these, market movements were not particularly pronounced. 

What is, however, generally more interesting is what happens on the markets the day after. Yesterday, they showed no clear indications, with government bond yields rising moderately and then quite significantly in the US by the end of the day, the leading European share indices dropping off moderately, and commodities generally picking up their pace.

Focus on upcoming data releases

Market participants are now focusing on the release of two data sets on Friday: consumer price data for the eurozone in May, before the so-called PCE core inflation rate for April is published in the US in the afternoon. The latter, tracking personal consumption expenditure, is the Fed’s preferred inflation measure to guide its decisions.
The markets are currently expecting a moderate drop in the monthly rate from 0.3 to 0.2 per cent, with the second or third decimal possibly proving crucial. A decline in inflationary pressure would entail headwinds for the US dollar and government bond yields, which in turn could support gold prices. If the opposite happens, a short-term setback for the yellow metal would be conceivable.

We shall see. Tomorrow is Corpus Christi, a public holiday in the German state of Hesse – the only one which is not a bank holiday in the rest of the country. It gives us a short break here in the financial centre and is the reason why this report is published a day early.

Week-on-week gold price development

Last Thursday, gold traded at 2,371 US$ per ounce. It slipped to 2,325 by Friday morning, but has since stabilised, recovering to 2,364 yesterday afternoon. Today (Wednesday) it stood at 2,359 in European trading at around 7:00, and intraday volatility is likely to remain pronounced for some time to come.
Xetra-Gold dropped from 70.45 € per gram last Thursday morning to 69.15 on Friday, also recovering to 69.90 yesterday afternoon. This morning, Xetra-Gold was expected to start trading at that level or slightly higher, at around 69.95 € per gram. 

We may remain in consolidation mode until the above-mentioned economic data releases on Friday. Over the next three weeks, a number of exciting and potentially market-moving central bank meetings and economic data releases are scheduled, on which I will of course keep you up to date – we hope you’ll return for your weekly update…

I wish all readers a happy – and possibly even a long – weekend.