Out to set new records

At the end of last week and early this week, gold prices initially continued their rally, with a tendency to follow other metals’ price jumps – such as silver, copper, and nickel. They all appreciated significantly on Friday and Monday for various reasons, including better-than-forecast data on industrial production in China in April. Nickel and silver led the way on Friday, with daily gains of 6.5 per cent each, while copper rose above the 11,000 US$ per tonne level for the first time on the London Metal Exchange on Monday. In the wake of these price developments, gold also rose above the 2,450 US$ per ounce mark for the first time on Whit Monday. 

Stubborn inflation

Over the course of the week, profit-taking set in, with metal prices starting to slide, yesterday in particular after consolidating at a high level on Tuesday, initially triggered by better-than-expected inflation data from the UK. This development fuelled fears that inflation in other countries could also remain at an unfavourably high level, which in turn means that interest rates could persist at a higher level for longer.

Fed: rate cuts not imminent

In line with the above, the Fed signalled in the minutes of its meeting on 1 May, published yesterday evening, that interest rates would remain high for the time being, with no cut imminent. According to the minutes, “many” members even questioned whether the current monetary policy was restrictive enough to achieve the inflation target. While the monetary authorities consider monetary policy well directed, some representatives showed a willingness, if necessary, to tighten it further. Inflation was disappointing in the first quarter, they added. It will therefore take longer for confidence to build that inflation will return to the two per cent target. 

Drop in willingness to invest?

A persistently high interest rate level could dampen investment readiness and demand for industrial metals, in particular. As a result, metal prices already came under pressure yesterday, especially as the US dollar appreciated moderately over the course of the day. Gold slipped below the 2,400 US$ per ounce mark.

Gold prices slightly lower week on week

Last Thursday, the yellow metal traded at 2,392 US$ per ounce and rose to 2,420 on Friday, reaching a new all-time high of 2,450 on Whit Monday. It started to slide yesterday morning, from 2,425 to 2,367 this morning. Today, Thursday, we started European trading at around 7:00 at 2,371 US$ per ounce, roughly one per cent below last week’s level.

Xetra-Gold was up from 70.65 € per gram last Thursday morning to 72.35 on Monday. It has since fallen to 70.80 yesterday afternoon and was expected to start trading today slightly lower, at around 70.45 € per gram. 

By and large, relatively little significant economic data is scheduled for publication before next Thursday. The rally on the metal markets appears to have run somewhat hot, which could cause further profit-taking or a high-level consolidation phase. 

I wish all readers a sunny weekend.