GoldPrice.

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 is turning in one of its worst weeks of the year after the rocket rally of April, which seems to have waned into May.

So, What Kind of a Week Has it Been?

In terms of gold’s strongest proportional relationships (inverse and otherwise,) the committee statement and Q&A that came out of the FOMC’s May Day meeting applied a tremendous amount of pressure on the gold market. Jerome Powell & Co. left no question that the Federal Reserve already was in no great hurry to start reducing interest rates for the US economy, even before a recent run of stubborn inflation data has raised questions about whether the battle against overbearing price-pressures is all that close to being won.  With a reaffirmed soft promise that rates will remain at their current “elevated” level for some time longer than the market anticipated at the start of this year, sell signals flashed in gold’s trading, especially for those (many) who were in a position to take a tidy profit on April’s historic high-points for the yellow metal in spot and futures markets.

However, neither the release of the FOMC committee statement nor Chair Powell’s press conference remarks were followed by a sharp drop—or sharp drop of any kind—in gold prices. In reality, those in the market who were ready to take the steepest profits possible had already front-run the Fed’s news overnight. In the latest trading for Monday (calendar date), the spot tumbled quickly as investors booked healthy gains for April and/or hedged against the FOMC news. As a result, gold traded its first long stretch below $2300/oz in nearly a month on Tuesday. Precious metals rebounded moderately pre-FOMC, managing to retake a place above 2300-support just before cash markets opened in New York.

Of course, we’ve talked for a couple of weeks now about this new driver of gold trading: a deepening concern throughout the market that the Fed might hold rates in place for too long might burn off the “soft-landing” that seems to have been pulled off, and instead drive the US economy into the recession they have nimbly avoided to this point. Through that lens, we would have expected the FOMC to draw a line under current interest rates through the near- and possibly mid-term to touch the market’s raw nerve and send gold on another quick climb. While the yellow metal managed to put together a decent run post-announcement to the neighborhood of $2325/oz, the new perch was short-lived. By Thursday morning, gold had slid back to support near $2300.

Seeing as the macro signals that were previously unnerving investors and pushing gold higher certainly haven’t gone away, the only going theory for gold at this point is that the rally itself had been exhausted (we saw this with flatter trading last week) and has been unable to rebound, or recoup investor attention, from the end-of-April sell-off for profit. Friday morning’s activity has born this out. The April Jobs Report once again caught the market consensus by surprise regarding the Non-Farm Payrolls number, but this time to the downside, coming in at just +175,000. Despite (what it seems the market would be keen to take as a) strong argument that cracks are starting to form in the US economic foundation, gold’s response has netted-out to near zero. An initial rally, only to $2310/oz, was quickly countered by a stronger rush of selling, which pushed the spot price as low as $2285.

Gold has again recovered to what may still be a supportive life-preserver at $2300, but this previously bold line of willing buyers looks much thinner now than at the start of the week. The macroeconomic data due for the next few days shouldn’t present any particularly rough waters for gold, but we will have a new week of commentary from FOMC officials trying to maintain the argument for patience with rates, which may hold this week’s downward pressure in place.

For now, traders, we hope you all have a fun and safe weekend ahead. We’ll see you back here next week for another market recap.