Rollercoaster

Here in Frankfurt, it is once again time for “Dippemess”, a folk festival held in spring and autumn, currently featuring 33 different rides, including a rollercoaster. No need for investors in the financial markets to pay for fairground amusements: a glance at this week’s price charts is likely to cause similar feelings of vertigo as the ride through the highs and lows of a rollercoaster.

Trump attacks Fed

Even over the Easter weekend, US President Trump could not resist feeding his social media channel, with a focus on Fed governor Powell, about whom he wrote that he would love to remove him from office due to his stubbornly sticking to high key interest rates. However, the Fed’s independence is important to the financial markets and one of the central prerequisites for a stable US dollar.

Strong start to the week for gold

As the US stock markets were open for trading on Easter Monday, there were strong, perhaps exaggerated, sales of US stocks, bonds and the US dollar, possibly due to the illiquid market environment. This in turn fueled the search for ‘safe havens’, benefitting gold, which rose 4 per cent. The weak US dollar, which dropped to its lowest level since November 2021 at 1.1573 US $ per €, further boosted the gold price.

Trump conciliatory – gold weakens

After US Treasury Secretary Scott Bessent initially explained on Tuesday that the current extremely high level of mutual tariffs between the US and China was unsustainable, Trump backtracked somewhat on Wednesday night. After the close of trading, he explained that the tariffs on China, currently at 145 per cent, were likely to be reduced ‘significantly’ soon. He also emphasized that he had absolutely no intention of firing Powell, although he would like to see the Fed chair take action on interest rate cuts. The US dollar recovered noticeably as a result, while gold prices took a dive. In other words, a rollercoaster ride.

Last Thursday morning, the gold traded at 3,335 US$ per ounce, the level at which it also closed the week. On Easter Monday, the precious metal jumped to 3,430 US$ per ounce in US trading. On Tuesday morning, it briefly touched 3,500, a level which many market players had not expected to see until the end of this year at the earliest. However, with the de-escalating statements from the US government, prices went down significantly – some of the ‘safe haven’ positions were unwound. Dropping to around 3,260 yesterday afternoon, gold quickly recovered by 100 US$ per ounce – truly unusually violent market movements. This Thursday morning, gold kicked off European trading at 7 a.m. at 3,325 US$ per ounce.

Xetra-Gold chart similarly turbulent

The Xetra-Gold price also reached a record high but then fell back significantly. From 94.50 € per gram last Thursday morning, it rose to 97.30 € at the start of trading after the Easter break on Tuesday morning but dropped off sharply to 92.30 yesterday afternoon. If the 7:00 level remains unchanged when the markets open, Xetra-Gold would start European trading at around 94.35 € per gram – although prices are currently changing faster than the wind.

Forecast: the turmoil continues

Although the market has calmed down slightly since Tuesday, the next strong market movement could be lurking around every corner, especially in view of the smoldering trade conflict. The financial markets, and bond markets in particular, currently seem to be exerting a kind of disciplining effect on the actions and announcements of the US government. Nevertheless, it is unlikely the markets will quickly return to ‘normal’ operations.

I wish all readers a relaxing weekend.