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 prices held within a reliable band of pricing this week. Almost as if it were a reward for this show of support well-above $2000/oz, the yellow metal has surged on Friday in response to elevating geopolitical tensions to close the week near February’s highest marks. 

So, what kind of week has it been? 

Gold spot prices are in a somewhat unusual place in this first quarter of 2024. It’s not so much that the trade is directionless, but (with a few outliers) the yellow metal seems not only content to trade within this band of $2020-2040/oz, at least until the FOMC makes its next announcement or move. And this holiday-shortened trading week has been a prime example of the current paradigm, as metals traders mostly ignored the two high-focus points of the (admittedly sparse) macro-data calendar in favor of continuing to price along a relatively flat line. 

That said, we’re also seeing a reminder at the end of this week that there is at least one exogenous driver, besides just the Fed, that has potential at any time to knock gold out of its current holding pattern. 

Despite the outsized influence that the US’ central bank has over not only the gold market, but the valuation and rates of the US Dollar—and, through the greenback, many other major asset classes—the first reporting item that the yellow metal eventually ignored this week came from the Fed itself, in the form of Wednesday’s release of the FOMC Meeting Minutes from the January 2024 session. While it would be incorrect to say the discussion notes landed on the marketplace with a great deal of shock, they did paint a fairly hawkish picture of the committee’s current consensus view; or at least one that was decidedly not dovish. As a result, initial trading on Wednesday afternoon saw a rally in the US Dollar Index and the coinciding rise in Treasury yields. This, in turn, pulled gold spot prices down from the tops of a gentle Tuesday rally, but there remained little interest in selling the metal below a price of $2025/oz. 

There was equally little volatility around what might have been expected to drive at least a moderate slide in gold prices as well, when the S&P’s Manufacturing Index for the US economy again outperformed expectations, and indicated a second consecutive month of expansion in the sector. In the current trading environment, we would have looked for investors to consider this another signal to the FOMC that they can continue to hold rates higher to “finish off” inflation without posing a serious risk to US economic expansion. Regardless of how investors across other assets processed the news, gold again held firm ground above $2020/oz following the print. 

There was a brief dip, during the European open of Friday’s session, that saw the yellow metal falling closer to $2015. Our model for gold trading in this tightly-fenced range for another week may have come apart as a result, but instead we’ve been reminded that gold always and at any time can react as a favored hedge against sudden geopolitical concerns around the globe. Here, a double-blow of further escalation in the multi-front tension and conflict around the Middle East and a more severe round of new sanctions imposed by the US on Russia’s economy appear to have shoved global investors on to the back-foot, from which they seem keener on gold as a safe-haven play than the US Dollar. Thanks to their inflows, gold spot prices are set to close Friday’s trading at the highest levels since the first day of February, in the neighborhood of $2040/oz. 

These last few days may be instructive for the next several, as the upcoming week is similarly light on key economic data, until the release of the Fed’s preferred measurement of inflation, the PCE Price Index, on Friday morning. 

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 market recap.