Overdue consolidation

The past few days have again seen strong price fluctuations. Investors were shaken by reports of explosions in the Iranian city of Isfahan on the night of Friday, 19 April, and fears that escalations in the Middle East could further spiral pushed demand for gold as a safe haven. The gold price briefly shot well above the mark of 2,400 US$ per ounce. The market situation calmed on Friday, amid increasing signs that the situation in the Middle East was slightly easing rather than escalating further.

Gold price at weekly low on Tuesday

After no additional worrying news from the Middle East was reported over the weekend, selling of safe haven investments was up on Monday. Government bonds, the US dollar, the Swiss franc alongside gold and silver were on the sell lists. The gold price plummeted by nearly 100 US$ per ounce to its weekly low on Tuesday around noon, but then bargain hunters seem to have stuck. By the evening, gold had recovered moderately. Yesterday, the gold price also held steady against rising government bond yields before dropping off slightly towards the end of the day.

Turnover up on Chinese futures exchanges

In the current environment, buying and selling on the Chinese futures exchanges is likely to play a major role in the strong gold price fluctuations. Recent weeks have seen reports of an enormous increase in turnover. The rise by around 20 per cent since early March is due to profit-taking and position smoothing; a consolidation phase would not necessarily be the worst thing to occur in a market that may have run slightly hot.

Gold consistently above 2,300 US$ per ounce

Last Thursday, the precious metal traded at US$2,375 per ounce. On Friday night, as mentioned above, it briefly jumped to 2,417.50 and closed last week at 2,391. On Monday and Tuesday, it came under heavy pressure and peaked at 2,292 on Tuesday morning. Since midday Tuesday, however, the precious metal has again been trading consistently above the 2,300 mark, at a high of 2,338. As European trading started this morning (Thursday), gold traded at 2,319 US$ per ounce around 8:00.

Firm euro weighs on Xetra-Gold

Xetra-Gold climbed from 71.55 € per gram last Thursday morning to 72.25 early Friday. A somewhat firmer euro then caused additional pressure, deflating the gold price to 69.10. After recovering to 70.20 yesterday, Xetra-Gold was expected to start trading this morning at around 69.60 € per gram.

Tomorrow, the release of the US core PCE price index (the Fed’s preferred inflation measure) is scheduled and likely to be highly relevant for market prices. The highlight of the coming week will be the Fed April meeting and the subsequent press conference by its chairman Jerome Powell on Wednesday evening, eagerly awaited by market participants.

We will be reporting on this next Thursday despite the German public holiday on Wednesday.

I wish all readers a warm and sunny weekend.