How the gold price fell to a weekly low on Tuesday and the effects of the activities on the Chinese futures exchanges.
25 April 2024. FRANKFURT (Xetra-Gold). The past few days have also seen strong price fluctuations. Investors were initially spooked by reports of explosions in the Iranian city of Isfahan on the night of Friday, April 19. There were fears that the escalation spiral in the Middle East could continue, which resulted in demand for gold as a “safe haven” and the gold price briefly shot well above the US$ 2,400 per ounce mark. Fortunately, over the course of Friday, there were increasing signs that the situation in the Middle East was easing slightly rather than escalating further.
Gold price hits weekly low on Tuesday After no new, additional worrying news from the Middle East was reported over the weekend, “safe havens” were sold out of portfolios on Monday: Government bonds, the US dollar, the Swiss franc and also gold and silver found themselves on the sell lists. As a result, the price of gold plummeted by almost US$ 100 per ounce to its weekly low on Tuesday lunchtime. However, bargain hunters then apparently returned to the scene. By the evening, gold had recovered moderately. Yesterday too, the gold price defied the rising government bond yields for a long time before falling slightly towards the end of the day.
Increase in gold turnover on Chinese futures exchanges Buying and selling on the Chinese futures exchanges is currently likely to play a major role in the strong fluctuations in gold prices. There have been reports of an enormous increase in turnover in recent weeks. With gold prices having risen by around 20 percent since the beginning of March, it is foreseeable that profit-taking and position smoothing is now likely to have occurred. A consolidation phase would not necessarily be the worst thing for a market that has perhaps run a little hot.
Gold consistently above US$ 2,300 per ounce again On Thursday last week, the precious metal was still trading at US$ 2,375 per ounce. On Friday night, as mentioned above, prices briefly jumped to 2,417.50 and closed last week at 2,391. On Monday and Tuesday, prices came under heavy pressure and peaked at 2,292 on Tuesday morning. Since midday on Tuesday, however, prices have been trading consistently above the 2,300 mark again - with a high of 2,338. Today, Thursday, we will start European trading at around 8 a.m. at US$ 2,319 per ounce.
Firm euro weighs on Xetra-Gold During normal trading hours, the price of Xetra-Gold climbed from €71.55 per gram on Thursday morning last week to €72.25 on Friday morning. A somewhat firmer euro then exerted additional pressure, causing the price to fall to 69.10. After recovering to €70.20 yesterday, Xetra-Gold is likely to start the day at around €69.60 per gram this morning.
Tomorrow, the release of the core PCE rate in the US (the Fed's preferred inflation measure) is on the data calendar and is likely to be highly relevant for market prices. The highlight of the coming week will be the Fed's April meeting and the subsequent press conference by its chairman Jerome Powell on Wednesday evening, which is eagerly awaited by market participants.
From Michael Blumenroth, 25 April 2024, © Deutsche Börse
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