Happy Friday, traders. Welcome to our weekly market wrap, where we take a look back at these last five trading days with a focus on the market news, economic data, and headlines that had the most impact on gold prices and other key correlated assets— and may continue to in the future.
While gold has lacked the strong momentum it enjoyed for much of the last month, the yellow metal held considerable ground this week and may have consolidated a solid platform for the start of Q4.
So, what kind of week has it been?
The last five trading sessions have been, on the net, a short-term negative for the gold market, but one that implies some medium- to longer-term optimism about the yellow metal may be warranted. It certainly had a bearish tinge from the outset, with Monday’s chart being hit by strong selling and out-flow for gold as many traders and managers sought to lock in profits before the books closed on September’s business. Roughed by the current, gold prices would fall to as low as $2630/oz. While this turned out to be the week’s nadir, that’s not to say the gold spot was only on the up-and-up following a rebound back above $2650 on Tuesday morning.
Macro data through the middle of the week weighed on the immediate outlook for gold prices, as they remain tightly tied to expectations for the FOMC to continue cutting rates and possibly with the same aggression as implied by September’s 50-basis-point move. The main focus ahead of Friday was on the dual ISM surveys of economic activity in the US. True, the read of the health of America’s vital manufacturing sector came in below expectations on Tuesday, but to such a marginal degree that it would be hard to call it a disappointment, and it certainly didn’t imply to the market that there may be a great risk of instability and recession in that space if the Fed let off the gas a bit. Conversely, the service-sector variant published by the ISM on Thursday was a strong improvement above expectations. Combined with a flow of commentary from key Fed officials, including Jerome Powell, which underlined a view that the FOMC can and will be patient and deliberate with the path down to neutral rates, it’s no surprise that gold prices couldn’t really grasp any new upward momentum this week. A second-consecutive cut at the November meeting is still probable, but a -0.50% move now seems much less urgent; gold prices struggled through midweek to hold any position above $2650/oz for long.
And this view— of the Fed’s next likely move(s) and of gold’s near-term outlook— was solidified on Friday with the September Jobs Report. In the least surprising “surprise” for any of us who have been tracking the NFP number since the pandemic, non-farm payrolls last month surged well beyond the expected mark of +140,000 to a whopping +254,000. Markets across the board have been reading this as Labor market worry averted and have leaned back into calling the Fed’s soft-landing a confirmed success. Equity markets rose steadily on the day, and in the immediate reaction to the released gold, spot prices fell to $2640.
So we’ve covered how this week was a mild letdown for the yellow metal— why should this read as a potential positive? Well, it comes down to that mildness of it all. Both commentary and data throughout the week seemed to push bearish signals, assuming the recent gold-trading paradigm remains. And yet, the price chart barely spent any time below $2650/oz, a level that was hard to imagine just six months ago. Even after a rush of profit-taking on Monday, even after a muting of expectations for another slash at interest rates that could spike spot another $15-30/oz, gold has largely held serve and consolidated September’s gains. Next week, the yellow metal has three relatively quiet (on the calendar, at least) trading sessions before the next big test of updated inflation info.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I’ll see you back here next week for another market recap.