Happy Friday, traders. Welcome to our recap of the news and economic data this week that was the most important for the gold market. With a shortened and lightly attended week due to the Thanksgiving holiday in the US, we have a shortened recap this week befitting five days of trading in precious metals and currencies that was largely uneventful until Friday’s US session.
With US equities’ half-day of trading now closed—and, with it, the trading month of November for stocks—gold spot prices are trading at a net gain for the week and roughly $10 higher for the day.
Donald Trump’s signing of a sanctions bill in support of Hong Kong seems likely to put a dent in what had been a week of progress in trade talks with China (as we’ll discuss below,) and today’s cash market was the first chance for major US investors to trade that news. Unsurprisingly then, we’ve seen stocks move lower and the Greenback sink from multi-week highs; all while gold prices have moved with strength to just below $1465/oz.
So, what kind of week has it been?
Mouthpieces for both the US and Chinese sides have spent most of the week signaling that talks are nearing “solutions” and an agreement on “phase one” of a trade deal.
As has been the case recently, the dominant narrative in this lighter holiday week was the development of trade talks between the US and China, with both sides still locked in a so far unproductive effort to hammer out a “phase one” deal as part of a broader trade peace. With nearly every headline striking a more positive tone this week, gold prices remained suppressed in flat-ish trading while US equities reached perfunctory new highs and the US Dollar strengthened consistently.
The week began with news that the Chinese government had taken steps to offer more protection against theft of intellectual property—part of a key sticking point on the US’ list of demands, and one with bi-partisan support in Washington—mostly by harshening the penalties in-country. The Chinese-controlled media on Monday also described the talks as “very close” to an initial deal. That sentiment was repeated later in the week by an official statement issues by China’s Ministry of Commerce, and (less convincingly, given the recent track record) public remarks from the White House.
Major US macro data outperformed expectations on a packed Wednesday docket.
Adding to the pressure on non-Dollar safe haven assets this week, the “core” variant of PCE (as a measure of inflation) was effectively unchanged for the month of October as was the more volatile headline number. Also on Wednesday, the second look at GDP growth for the third quarter revised the number higher against expectations for a decrease.
Rounding out the day, Durable Goods Orders for October rose following a pullback in the prior month, and after a few weeks of outliers the number of Initial Jobless Claims returned to the long-term trend around 215k. All these data points, in the current economic environment, are generally bullish for the Greenback and present a headwind to gold prices.
Despite POTUS signing congressional bill in support of Hong Kong protestors, China has issued only vague threats of retaliation—so far.
Somewhat unexpectedly and just ahead of Thanksgiving, Donald Trump signed into law a bill focused on sanctioning the Chinese government in direct support of the pro-democracy protests that have raged throughout Hong Kong for months and reached a fever pitch in recent weeks. Ahead of this week, it was unclear if the bill, which enjoyed massive bipartisan support from the legislature, would be signed by the President given China’s promised to retaliate through trade channels if he did so.
With the signing on Wednesday afternoon, markets braced a bit for the expected Chinese reprisal. In another mild surprise, as of the time of writing (effectively, the close of business for the week,) Beijing has only offered a repeat of their promise to respond. This time, the threat came with much more aggressive language threatening “strong counter-measures”-- but nonetheless it’s only rhetoric so far. A growing number of warning sounds around the Chinese economy may be contributing to their reticence to act just yet. Still, with an important deadline just ahead—a new round of tougher punitive tariffs is scheduled to take effect on December 15 in the even that a deal hasn’t been reached—we surely haven’t seen the last move in this round just yet.
While the narrative around US-China trade talks will continue to pull focus as we move into December next week, things will also spin back up on the economic calendar with the release of November’s Jobs Report on Friday. Ahead of that, we’ll get some important updates on PMI data.
Until then, enjoy your weekend and your leftovers, traders. I’ll see you all back here on Monday as we kick off the final month of 2019.