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 may continue to into the future—as well as the charts for silver, the US Dollar and other key correlated assets.
Gold prices are capping what looked like a net-positive week with a surprising New Year’s Eve rally against a drop in the US Dollar; Barring a sudden shock near the market close, gold prices will close 2021 and shift into 2022 with an opportunity to continue building support near current levels before investors turn their attention back to the Fed and interest rates in January.
So, what kind of week has it been?
Gold prices continued on at a healthy clip from a positive start Monday and, shortly before US markets opened for the next trading session, gold spot reached its weekly high at $1818/oz. There remained little in the way of true momentum drivers for the yellow metal, aside from some healthy rallies elsewhere in the broad commodities complex, and in the same morning gold’s chart was toppled by the kind of profit-taking that is not uncommon at the close of a month, quarter, and year’s book of business. The Tuesday session saw gold fall back to support just above $1800.
The general mood of investors this week has carried a kind of holiday optimism, or at least a lack of worries. In equity markets, this has been conveyed by key sub-sectors and, on some days, entire indexes, shifting steadily (though not aggressively) up and to the left; But the most energetic expression of the week so far was Wednesday’s surge in Treasury yields. From the early morning hours (at which point UK markets had rejoined after Monday and Tuesday off,) sovereign debt prices dropped and the corresponding yields climbed higher in a trend that analysts—maybe for lack of another explanation, more than anything—began chalking up to an optimistic bet on better economic growth in the year ahead. As the US’ benchmark 10-year note’s yield surge above 1.55% once again, gold spot prices played their now-familiar response and fell below $1800 for a time. Gold’s bottom for the week was put in at $1790/oz, just before US cash markets opened and arrested the Treasury market slide.
It was clear, through Wednesday’s US trading hours, that gold retained healthy buying support here at the end of 2021, and the yellow metal reclaimed a position above $1800 by lunchtime in New York. The overall market mood showed little other signs of change by (late) Wednesday night, save for a rally in the US Dollar Index (which really found its legs in the European morning hours) that tamped down on elevated Treasury yields. Vitally, this USD run was not so aggressive as to put the pinch on gold that we saw at different times over the last two weeks; instead, gold enjoyed a healthy tailwind alongside recovering bond prices on Thursday morning.
There was a though that Thursday morning’s better-than-expected Initial Jobless Claims data might pull back on gold if investors focused on it as a hawkish signal to-and-from the Fed. Instead, gold’s climb found new legs with the start of cash trading on Thursday morning and continued on, accelerating in particular as the 10-year note fell farther and faster (before bottoming-out near 1.50%.) Thursday afternoon saw trading in precious metals slow along with most other asset classes, but gold consolidated the gains of a strong day, around $1815/oz.
Friday, the final US trading hours of 2021 has seen light activity (as expected) in nearly every major asset class—with the notable exception of gold. Just as US traders took market control for the morning, from roughly an hour before the New York open, the US Dollar appears to have fallen prey to its own rash of profit-taking—something that we honestly might have said was more likely to knock on gold’s door. As the greenback has slid back from this week’s gains, we see some mild reactions in the Treasury market but it’s the precious yellow metal that’s enjoying strongest lift in response. While the chart for spot prices has moderated a bit from the very top ($1826, a late weekly high,) around lunchtime on Friday gold appears to have made good consolidation efforts just a couple of dollars below.
As long as there are trading hour left in the year, there remains a possibility that gold could also suffer a run of selling as traders and managers try to squeeze a bit more profit onto the books for 2021. That said, gold seems to be wrapping the year with positive momentum to carry into January.
Next week, week kick off 2022—a year that will likely see plenty of shifts and swings in larger gold market trends during Q1, as investors and managers try to figure out the Fed—with an important monthly Jobs Report due Friday.
For now, traders, I hope you can get out and safely enjoy your New Year’s weekend for the next couple of days. After that, I’ll see everyone back here on Monday for a new year, and our preview of the week ahead.