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 are tailing into a Friday close within touching distance of its Monday morning open. 

So, what kind of week has it been? 

Thanks to the US Independence Day holiday falling awkwardly on Tuesday, it’s been a choppy week of gold trading, but one that hasn’t featured the wild swings in price or volatility that we might have expected. After two key macro data events that tie directly to the near-term path of monetary policy— the single biggest input to projecting gold prices at the moment— however, we are starting to see, maybe for the first time in over a year, the potential for a shift in the gold/rates dynamic.  

The first “data drop,” in reality, didn’t bring us anything new but rather repeated the same cycle we’ve come to expect (and gold traders have learned to endure) throughout the Fed’s current campaign of hiking interest rates in an effort to slow the US economy and tame post-pandemic inflation pressures. With the release of discussion minutes from the most recent FOMC meeting (at which, crucially, the FOMC did not raise rates for the first time in nine,) we saw evidence that the committee members never seemed to seriously consider the option to “pause” for an extended period, much less to entirely end their hiking cycle this soon. Resuming hikes of at least +0.25% later this summer (if not this month) was always part of the Fed’s plan. At least, the Fed’s plan as of two weeks ago. (We’ll come back to that point.) 

Gold had come out of the 4th of July break mostly in-line with where Sunday evening/Monday morning had found it, consolidating some strength along the line of $1925/oz in the spot market. Somewhat surprisingly, the yellow metal had little in the way of a lasting reaction to the FOMC minutes released on Wednesday. Bedraggled, maybe exhausted from rising on every rose-tinted hope that the Fed would be forced to cut rates earlier than expected (despite the central bankers’ constant signaling to the contrary,) only to drop back down to Earth each time, the gold market may have just given in to the Fed’s projection of higher rates for longer. The gold traders’ consensus may have finally decided to price in reality. As a result, the market closed on Wednesday with the gold spot having only shed roughly $5/oz on the day; but the tinge of pessimism rewarded in the first hours of Thursday’s New York trading, when the ADP Payrolls data— a measure of how private sector jobs have increased or decreased for a given month— spectacularly outperformed. As investors and traders braced for another robust Jobs Report to follow the next day, gold prices tumbled as yields and the US Dollar ripped higher. Spot gold fell as low as $1905 before rebounding to $1910/oz, and the active COMEX futures contract settled at its lowest mark since Q1. 

Just in time for this apparent capitulation by the gold market, that the status quo (at least in terms of monetary policy and the rate environment) will remain as such for a while yet, the June Jobs Report threw everyone on a curve ball. On Friday morning, the NFP number missed below expectations— a shock result in the context of a year or more of consistent outperformance in the primary labor market metric. The number of jobs added to the US economy for the month— for so long, the clearest supporting stat for the Fed’s continued tightening— printed on Friday its meekest month-over-month growth since 2020. 

In response to this signal that things might actually be turning to oppose the “free reign” of the Fed’s hawks, gold has made a solid, steady rally through Friday’s trading. The yellow metal has climbed back to the $1925 level, effectively wiping out the slow drift of Wednesday and the steep slide of Thursday. 

Where gold goes next week will likely be decided on Wednesday, when we get the newest report on US inflation data from the June CPI report. It’s also likely, in response to Friday’s jobs data, that we get a more meaningful round than usual of public commentary for FOMC officials, looking to put the “right” foot forward regarding how the FOMC will digest a signal from the labor market that it hasn’t had to reckon with in some time. 

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!