GoldPrice.

Happy Friday, traders. Welcome to our weekly market wrap, where we 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 into the future.

At the end of a week where gold initially seemed to live above the fray of some back-sliding markets, investor worries have again overtaken any support or momentum that might be unique to the yellow metal and have pulled spot prices to recent lows.

So, what kind of week has it been?

There are some weeks where a broad recap of markets involves discussing a steady churn of investor activity and sentiment; there are some when we stretch to fill more than a paragraph or two because both headlines and volatility are limited. Some weeks, there only comes one key market-moving event, and prices move to take a resetting step higher or lower (depending on the pressure applied.) This week brings a fourth "option," one that we haven't seen for some time-- and one a number of investors and traders will hope we don't see again soon: Since Thursday morning's open (before that, if you want to include futures trading,) we've seen markets make significant, volatile moves up and down in the same session.
 
First-half trading this week felt like markets, prices, and investor attitudes were back-sliding, weighted down by worry that either inflation will remain overheated and untamable for some time or the Fed's efforts to counter these price pressures will come at too high a cost for economic growth or some dystopian combination of both. The dance was familiar for anyone tracking markets since the summer: equities didn't drop so much as slide, and commodities turned downward, all as the Dollar regained some of the multi-decade strength that had dropped away in recent weeks. Gold prices, however, were mostly inured to the Dollar's drag: the yellow metal's spot prices held serve between the boundaries of $1660-70/oz through Wednesday afternoon and even took a lift higher mid-week as investors digested some very down-the-middle FOMC minutes.
 
All week, eyes were on this morning and the release of new inflation data via the CPI report for September; and nobody seemed to be particularly hopeful. Not surprising since, as we've been covering here for a few weeks, the binary choice seemed to be "inflation is still hot, and everything is terrible" or "inflation will be mildly weaker, encouraging the Fed to keep making everything terrible."
 
When numbers hit the transom, the pessimists ruled the roost. Headline inflation, year-over-year, continued pushing higher in September to an eye-watering +8.2%; the vital "core CPI" number climbed by 0.6% in the month of September alone, rising by more than 50% more than expected.
 

Takeaways from this new CPI number:

• +0.6 percent on a monthly core basis, v fast
• -Used car prices fell, but not as much as expected
• Shelter, new cars, car parts, medical care, food all more expensive
• Upshot: Fast, broad, bad news https://t.co/ibcJ7mVvY3

— Jeanna Smialek (@jeannasmialek) October 13, 2022
 
Very much in line with what we would expect in 2022, risk markets cratered. Equities futures rolled off the table as the US Dollar Index surged back to within a touching distance of 114. In virtually any other year of modern commodities, we would look for gold to rocket higher on this kind of data. Instead, nearly $30/oz melted away from the gold spot price.
In other corners, the benchmark 10-year yield spiked to 4% while a shudder ran through the rest of the commodities complex as crude oil prices gave up more than a week of gains. A very textbook reaction to September's CPI data coming in pretty much as bad as could be reasonably expected. 
 
After the opening bell, it looked as if the sell-off would continue through the hours of cash-equities trading as it had started in the early morning. About less than two hours later (virtually "on a dime" for market clocks,) everything reversed course. Here, to one degree or another, everything that was down was now unquestionably up (and vis versa, although the only things "up" this morning were the Dollar and brokers' blood pressure. All three major US stock indexes are not just back to even on the day but up by +2% or higher; the Dow has gained nearly 900 points since recouping losses. Disappointingly for metals traders that also bought the dip, however, of the mid-morning rallies, gold's was the least successful, with the yellow metal still ending down on the day, likely due to sustained pressure from a US Dollar that is down on the day, but remains at its strongest in over ten years.

If price action is weird, something else is going on. That's the deal with today's hot US CPI. Euro fell intially, as it should, but then ripped higher. Lots of deleveraging going on since UK bond market ructions began. Don't waste time trying to rationalize this price action... pic.twitter.com/yxQu9UGnFu

— Robin Brooks (@RobinBrooksIIF) October 13, 2022

The implication that spasms happening in the UK and European markets, and the prevailing impacts on the associated currencies, are a driver of this sudden and surprising turnaround certainly have some weight. But reading any coverage of today's trading from US-based financial media points to what we'll call an "aggressively, willfully optimistic view" for US investors that boils down to "surely this is the worst inflation can get, and things can only improve from here."
 
It seems like a big swing to take on a tight bet: After all, for this market optimism not to burst, not only does next month's CPI need to show meaningful signs of cooling, but in the four weeks between here and now we'd probably need to go without any signals to the contrary. On the other side, for markets to go gloomy again, all that needs to happen is, more or less, anything else.
 
And, if we're all being honest, that looks to be the turn that Friday has taken, as if investors are reawakening from a pleasant dream to face something…less so. With Treasury yields snapping back higher-- the 10year yield is back above +4%-- gold prices have given up the ghost again and will likely close the week below $1650/oz, more than $30 off the top. Likewise, equities are back on the downslope, with the Dollar again well above 113.
 
Next week is much lighter in terms of expected developments, but we have to expect that will serve to put commentary from Fed officials front and center as we see if the return of dark and stormy markets will carry through to Halloween.

For now, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I'll see everyone back here on Monday for our preview of the week ahead.