The prospect of a further delay in lower interest rates is supporting the gold price, Blumenroth summarises the week.
3 May 2024. FRANKFURT (Xetra-Gold). A week in which gold initially suffered from both rising US government bond yields and profit-taking. In addition, few weeks this year are likely to be as full of economic data as this one. And this is despite the public holiday in Central Europe yesterday and the public holidays in China and elsewhere that follow.
Let's stay in Europe for now: according to the first estimate for gross domestic product in the first quarter of 2024, there are signs of positive economic development in Germany and the eurozone - this grew more strongly than analysts had expected on average. As the core inflation rate in the eurozone, adjusted for energy and food prices, also fell less than expected in April, yields on government bonds in eurozone countries rose.
No interest rate hike in the USA
Meanwhile, labor costs in the US rose much more sharply in the first quarter than analysts had expected. Compared to the previous year, they are now 4.2% higher, which has further diminished expectations of an interest rate turnaround by the Fed. Before yesterday's Fed meeting, the interest rate futures markets were therefore only pricing in a single rate hike in December. Many analysts now even considered a further interest rate hike by the Fed to be possible. However, after Fed Governor Jerome Powell continued to focus on potential interest rate cuts during the press conference, a second rate cut in 2024 was priced in again with an almost 50% probability. Yields on US government bonds fell moderately, as did the US dollar, which had previously had a strong week.
Gold in US dollars recovers to previous week's level
This in turn supported gold prices yesterday evening after they had come under some pressure in the run-up to the Fed meeting: On Thursday last week, the precious metal was still trading at US$ 2,319 per ounce and had risen again to 2,352 by midday on Friday. On Tuesday, the yellow metal lost around two percent at the end of April and slipped below the 2,300 mark. After the weekly low of 2,282 yesterday morning, the Fed meeting was a blessing for gold prices: They climbed back up to 2,328. Today, Thursday, we start European trading at around 7 a.m. at 2,319 US$ per ounce - almost exactly the same level as last week.
Xetra-Gold performs similarly
During normal trading hours, the price of Xetra-Gold climbed from €69.60 per gram on Thursday morning last week to 70.45€ on Friday afternoon. After the holiday yesterday, Xetra-Gold is likely to start the day at around 69.55 € per gram this morning.
Tomorrow there will be the US labor market report, which is likely to be meticulously studied by the US Federal Reserve and analysts. The coming week will be much quieter in terms of economic data. Possibly a few days to take a breather and consolidate the violent market movements that have occurred this week, including in trading with the Japanese yen.
I wish all readers a relaxing, albeit no longer quite so warm, weekend.
Von Michael Blumenroth, 3 May 2024, © Deutsche Börse
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