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 into the future.
Gold prices are fluctuating within a narrow $5 band in Friday’s trading, alternating between a moderate gain for the session, and a mild loss.
So, What Kind of a Week Has it Been?
Relative to recent weeks’ volatility and velocity, gold prices are turning in a mild week of trading, thanks in part to a calm macroeconomic calendar and landscape these next five days. It’s a positive signal for gold, moving into the end stages of 2023, that this kind of cool-down period still sees the yellow metal mostly holding serve and consolidating recent gains, rather than retreating. Indeed, despite Friday’s weakness, gold prices are still set for another weekly gain, and are arguably outperforming equities in the back-half of the year so far.
Many of the factors from the overall macroeconomic backdrop that have been supportive of gold’s upside cases have persisted this week— primarily the geopolitical risk driven by the ongoing war over Gaza in the middle east, which continues to dull investors’ risk-appetite. And while one has fallen away, as the US House of Representatives, however tenuously, have managed to elect a new Speaker with hopes of now turning attention back to legislating, gold has enjoyed a new tailwind this week as a generalized downturn in the US stock market has further encouraged risk-off positioning by traders and money managers.
On the “hard” data front, a surprisingly strong New Home Sales number printed on Wednesday, suggesting a level of strength of the US economy that once again argues for higher interest rates to be allowed to persist. Beyond that, the two macro data-drops we had earmarked to star the week were Thursday’s initial read of Q3 GDP growth for the US economy, and Friday’s PCE Price Index, providing another breakdown of US inflation for September.
As anticipated, there has been little market reaction to Friday’s PCE numbers, as it largely presents the same data that the market has seen and digests over the last two weeks, in the form of the Consumer Price Index, the PPI, and other reports. That said, that the month-over-month increase in price-pressures came in very slightly above expectations may be contributing to gold’s softness in the final trading session of the week. (This, too, suggests higher rates for longer, as the Fed may point to it’s “preferred” metric for inflation as a proof that the job— to quell inflation— is not yet done.)
Thursday’s GDP read, on the other hand, outperformed expectations considerably, estimating quarterly growth at +4.9% vs. +4.3%. Again, if the US economy and its consumers appear (in the data, if not anecdotally) to remain healthy despite the constriction of higher interest rates, that makes less compelling any argument that the FOMC may turn towards easing policy rates sooner than expected. Understandably then, gold prices did slide a bit on Thursday, as Treasury yields again moved higher with the 10yr Note’s yield continuing to hover just below +5%. Even with the slide, gold prices showed solid support above $1975/oz after a $10+ loss.
In contrast to the last two weeks of trading, we're seeing a stronger rally for gold in advance of the market being closed over the weekend, in which the geopolitical ramifications of conflict in the Middle East are playing a role. So one of the first questions to answer next week is how this might impact Monday’s action. From there, the macroeconomic calendar gets considerably more energetic, with the next FOMC meeting ending Wednesday, and the October Jobs Report due on Friday. With both will come more challenges— or possibly accelerants— of gold’s recent rally.
For now, traders, I hope everyone has a fun and safe weekend ahead. We’ll see you back here next week for another market recap.