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.
Gold prices are flat, on net, in Friday’s trading so far. Although current spot prices reflect a decline on the week after the yellow metal was unable to hold onto its highs, there are indications that prices are building stronger support above $1900 at summer’s end.
So, what kind of week has it been?
It always seemed like this week— effectively shortened to four trading sessions by Monday’s Labor Day break in the US— was going to be off-kilter for the gold market, as well as markets for the US Dollar and other key trading-counters to the yellow metal. The economic data calendar was light on meaningful metrics for the US (particularly as might pertain to upcoming Fed policy decisions,) and the schedule was back-loaded with the first rush of multiple public appearances by key FOMC participants following the Jackson Hole summit to end August. At the same time, as the slow, stodgy summer of 2023 rolls to a close, the likelihood of headlines sparking any serious market moves seemed minimal. (On this, at least, we’ve been spot-on.) But, in truth, coming out of Labor Day, we would have projected that if there were traceable moves in the gold market and its counterparts, that would be driven by the remarks of Fed officials later on in the week, more so than being a result of the thing stream of macro data.
In the numbers, the top line of the ISM’s survey suggested that the US economy’s service sector is re-accelerating and rebounding faster than expected. Here, again, the implication that the US economy and the US consumer remain resilient in spite of the aggressive tightening of financial conditions created by the Fed— so far— in an effort to tamp down inflation, is read as “permission” for the US central bank to carry on as they’ve begun, and to continue raising rates (at least) 1-2 more times this year. The most aggressive reaction to this read was seen in the US Treasury markets, where prices of T-Bills plummeted and rates shot to the sky; yields on the 10-year Treasury Note spiked to 4.3%. The corresponding rise in the US Dollar was milder, but this appears to have been mostly a result of the bullish gains the Greenback had made between Friday and Tuesday, pushing the USD to a six-month high and bringing the ceiling of resistance closer. Gold, meanwhile, tumbled roughly $10/oz on Wednesday morning before buyers stepped in at the low of the week, near $1915.
The gold trade sat mostly flat through Thursday, where it seemed the book of business would close for the yellow metal this week. In Friday’s trading so far, however, we’re seeing the Dollar’s peak start to weaken a bit, possibly a result of end-of-week profit-taking by USD-longs, particularly overseas. In response, gold initially took glad advantage of the extra breathing room: spot prices rallied back to $1925 in overnight trading and even ticked a high point of $1930 in the first hours of US markets. Since then, however, gold has retreated again, likely dragged by its own run of profit-taking sales.
All things considered, this has the feeling of an at least moderately positive week for gold, having held and consolidated a line of support near $1920 as we move deeper into the final month of Q3 2023. That support could be pivotal for gold next week, with updated inflation data due Wednesday, where the projected step down in core CPI, closer to +4.0%, is expected to generate another rally in the Dollar and strong headwinds against gold.
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 next week for another gold market recap.