Biggest drop in gold prices since November

The Gold price has this week seen its biggest drop since the election of Donald Trump in early November last year. In five days, the price of the precious metal dropped by 4%, from €37,409 to around €35,900 per kilogram.

In dollar terms, the decline was somewhat smaller at 3.2%, as the euro strengthened somewhat against the US currency this week. At the time of writing, a troy ounce costs $1,227, while a price of $1,268 was still on the boards on Monday morning.

Silver has also become somewhat cheaper again, as the price fell on Friday for the fourteenth trading day in a row. In the past week, the silver price dropped from €507 to €477 per kilogram (-5.92%) and from $17.20 to $16.30 per troy ounce (-5.23%).

Gold price fell by about 4% this week

Negative sentiment

Sentiment towards gold and silver has shifted since the first round of French elections on April 23. Presidential candidate Macron, who is portrayed as a moderate and pro-European candidate, is leading the election race. Investors believe that the chances of a Frexit are shrinking and are abandoning safe havens such as gold and silver in exchange for stocks and bonds.

The second round of voting will be held in France on Sunday 7 May. According to the latest polls, Macron will win just over 60% of the vote there, which in theory is enough to become the new president of France. Investors have already anticipated this by selling gold and getting into euros.

In addition to the election, new jobs data from the United States also had an impact on the price of gold. In April, 211,000 new jobs were added, while investors were expecting 190,000. Positive macroeconomic data often have a direct impact on the prices of precious metals.

Prices of precious metals such as platinum and palladium also fell during the week, but managed to recoup some of the losses on Friday. These precious metals have many industrial applications and therefore have a relatively cyclical character. In an upward cycle, sentiment is positive and demand for cars, a sector where many of these metals are used, is rising.

Biggest weekly drop in gold prices since November (Chart via Bloomberg)

Federal Reserve

Last Wednesday, the Federal Reserve confirmed its plans to raise interest rates further later this year. It did not come to an interest rate hike, but Yellen's optimistic words were enough reason for investors to reduce their position in gold.

Rising interest rates mean that the dollar will increase in value and that it will be relatively more expensive to hold gold. This, too, may have prompted some investors to sell some gold.

Compared to the beginning of this year, the gold price in euros is currently 1.8% higher, while silver is 5.5% lower than on 1 January after a good start at the beginning of this year.