Various factors impact gold price

Geopolitical and financial developments have had a major influence on the price of gold over the past week.

• Its perception as a safe haven has served as a tailwind to the precious metal. The news flow regarding developments in the Russia-Ukraine war prompted investors to flock to this haven, and gold once again traded above the 2,700 US$ per ounce mark by the end of the week, recovering more than 180 US$ per ounce from its recent three-month low. Many market participants anticipating a further decline invested in short positions in the futures markets and were disappointed accordingly.
• At the beginning of the week, the financial markets were appeased by the staff decision in favour of Scott Bessent as the designated US Treasury Secretary. Considered a supporter of a sound fiscal policy, he is likely to allay the concerns of many investors regarding the escalating US national debt. The gold prices weakened moderately at the start of trading in Asia. Many investors are likely to have added gold to their portfolios rather recently as ‘insurance’ against sharply rising government debt.
• And finally, the agreed ceasefire between Israel and its opponents in Lebanon could reduce geopolitical tensions in the Middle East, which could also reduce the necessity for an ‘insurance premium’ in the short term.

Ultimately, the latter two points outweighed the uncertainty surrounding the Russia-Ukraine war, somewhat weakening gold prices week on week:

Last Wednesday evening, the precious metal traded at 2,655 US$ per ounce but had risen to around 2,721 by the end of the week. With US yields slightly down and the resulting weakening of the US dollar, gold recovered to 2,658 US$ per ounce yesterday afternoon but then dropped back to 2,640 by the end of the European trading day.

Xetra-Gold was also moderately down over the course of the week, partly due to the euro appreciating slightly against the US dollar. From 81.05 € per gram last Wednesday evening, it rose to 83.75 at the end of the week. Since Monday, it has, however, also come under pressure. Xetra-Gold dropped to 80.05 € per gram on Tuesday and recovered only slightly to 80.30 by the close of trading yesterday (Wednesday).

Outlook: US labour market data and ECB meeting could move the markets

With today’s Thanksgiving holiday, many US traders are likely to be taking a long weekend, and market movements are set to remain modest. Over the next two weeks – during which I will unfortunately be unable to provide my weekly market commentary – the market highlights will be the US labour market data on 6 December and the ECB meeting on 12 December with new forecasts and projections presented by the monetary authority. Both could cause strong market movements.

I wish all readers all the best a good start to the Advent season.