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 dipped slightly when the book of business for 2024 first opened, but at the end of a holiday-shortened week, the yellow metal looks to be in sturdy shape.
So, what kind of week has it been?
The US Dollar had the best first day of 2024. While there was not a spectacular surge for the Greenback, it steadily strengthened in Tuesday’s trading, to the detriment of most other key asset classes. Not only did gold see some weakness in the morning hours, but the three major US stock indexes slid throughout the session.
Our first data point of note for this new year was Wednesday morning’s ISM Manufacturing Survey. The headline number remains a couple of points below the 50.0 expansion-contraction breakeven but at the level within a margin of error for the consensus projection. Besides, this moderate weakness in the US industrial sector (according to this traditional data set, at least) has been the state of play for several months now, and so is entirely priced into the current consensus FOMC projection. It’s not surprising, then, that we saw little action of note in the gold chart on Wednesday morning.
At least not as a result of macro-data. Carrying on Tuesday’s trendlines—or perhaps being informed by them—investors appeared to take positions early Wednesday morning in anticipation of the FOMC meeting minutes (to be released later that afternoon), implying that the committee remains a little more hawkish or just a little less certain about the timing of the first post-pandemic interest rate cut. The US Dollar continued to firm up Tuesday’s gains while gold prices dropped consistently in the first half of London trading. Before New York took the baton, the yellow metal had shed roughly $30/oz before resting on support at around $2030.
When they arrived, the FOMC minutes didn’t show any wavering of the majority opinion that it’s time to end rate hikes and cut in 2024; there was just an unusually high level of uncertainty around when to begin. An initial move to dump gold prices and boost the Dollar much higher was mitigated and then reversed as investors parsed and digested the minutes. Ultimately, gold spot prices firmed up in the afternoon, regaining a toe-hold above $2042/oz. Meanwhile, investors, analysts, and traders will not begin to set their markers for how to trade the Fed’s next move in 2024; some of the positioning is likely to have been done this week, but we expect to see more of it following next week’s refreshed consumer-inflation data.
After an uneventful Thursday, Friday’s trading session so far has been a whipsaw for both gold and US Treasury yields. From the December Jobs Report that was delivered pre-market, we see that at least one 2023 data trend that will continue for now is the consistent “surprise” of the headline NFP number (effectively, the jobs added to the US economy last month), strongly outperforming the consensus projections. This time around, December’s NFP printed well above +200K despite expectations for a number closer to +170K. For much of 2023, this was interpreted as a signal that the FOMC may not feel compelled to stop hiking rates and/or begin easing their pressure on the US economy, and it brought a steady headwind against gold prices. Today, we’ve seen some remnants of that pattern as the trading immediately following the release of the Jobs Report saw gold prices weaken a bit as Treasury yields climbed quickly, along with a rising US Dollar. That said, particularly following Wednesday’s readings of the most recent FOMC Minutes, there’s no question now that the Fed has decided to stop raising rates. As a result, gold prices simply traded as more subdued than sunk on Friday morning, maintaining reliable support around $2040/oz.
The “whip” part of the whipsaw came unexpectedly on Friday, with the ISM Service-Sector Survey coming in in much shakier shape than expected for December, only barely avoiding an indication of contraction. The knee-jerk reaction from investors was to infer added pressure on the Fed to begin implementing rate cuts sooner than later, yanking US Treasury yields back down quickly and muting the Dollar’s rally as well. Gold spot prices had already begun to rally above $2040 once cash trading opened for the day, but the ISM miss gave the yellow metal a significant boost, and the chart peaked at $2060/oz.
This mid-morning recovery in gold has since seen a mild sell-off as some traders look to take their first profits of the new year, but overall, this is netting out to be a decent first few trading days for gold in 2024. Next week, the first full trading week of the year, we’ll come across another crucial pivot point for gold and broader financial markets in the December CPI inflation data.
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.