Strong tailwind

US economic data has dominated market movement over the past few days. Starting last Thursday, the US Department of Labor reported a noticeably higher increase in initial jobless claims for the previous week than had been expected by analysts. Although possibly attributable to a seasonal bias, the markets interpreted the data as the first sign of a weakening US labor market.

Focus on US economy

Friday saw a significant decline in US consumer confidence (measured by the University of Michigan index), further fueling the narrative of a possible dip in the US economy. This led to a downward trend in US government bond yields and a slight headwind for the US dollar, which served to boost gold prices at the end of the week. The new week saw market players eagerly awaiting yesterday’s US consumer price and retail sales figures for April.

Slightly weaker US inflation  

Inflationary pressure in the US eased somewhat in April. Consumer prices remained below expectations, rising 0.3 per cent month on month and at 3.4 per cent (previous month: 3.5 per cent), they were above those of the same month last year. The core inflation rate adjusted for energy and food prices dropped for the first time in six months to its lowest level since April 2021 at 3.6 per cent. Retail sales stagnated in April, contrary to forecasts of a moderate increase. On the financial markets, the immediate reaction was that yields on US government bonds weakened by around 0.10 percentage points across all maturities and the US dollar depreciated moderately, causing gold to rise to a weekly high and then return to its starting level over the course of the day.

Gold in US dollars up 3 per cent week on week

Last Wednesday, gold traded at 2,319 US$ per ounce but rose to 2,377.50 on Thursday and Friday for the reasons mentioned above, ending the trading week at 2,360. On Monday and Tuesday, the precious metal retreated somewhat before making a new upward run yesterday following the publication of US consumer price data, reaching 2,397 US$ last night due to the noticeable fall in US yields. Today, Thursday, European trading at around 7 a.m. started at 2,392 US$ per ounce, roughly three per cent higher than last week.

Xetra-Gold tops 70 € per gram

Xetra-Gold rose from 69.35 € per gram on Wednesday morning last week to 70.90 on Friday afternoon. At the beginning of the week, it weakened to 69.50 before recovering significantly yesterday afternoon and evening. This morning, Xetra-Gold was expected to start trading at around 70.65 € per gram.

Tomorrow, Friday, market participants will be turning their attention to Chinese industrial production and retail sales data to see whether there are signs of an accelerated economic recovery in China at the beginning of the second quarter. In addition, second-tier economic data is scheduled for publication over the next few days. Let’s see what the markets make of this; the majority of market players currently appear quite risk averse.

I wish all readers a pleasant and relaxing Pentecost weekend.