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.
At the tail end of a mostly calm market week that also saw the close of a month and a financial quarter, gold prices have recovered from slippery weakness on Monday and Tuesday and now look likely to close more than $5/oz above Sunday evening’s opening bids.
So, what kind of week has it been?
We’re wrapping up an otherwise uneventful trading week with an overall promising Jobs Report detailing the month of June. The Labor Department reported 850,000 non-farm jobs were added to the US economy last month, coming in above the consensus estimates of roughly 700K.
- The June number represents a solid improvement in the US labor market from the month prior, when the NFP number came in at 559K.
- Some economists and analysts are expressing mild concern about the headline unemployment rate ticking 0.1% higher (against expectations) despite the rough “participation rate” being unchanged. But, on the whole, observers and markets are viewing the June Jobs report as another indication that the US economic recovering is continuing to pick up pace and repair the damage done to the labor market by 2020’s pandemic-driven lockdowns.
- As of Friday afternoon, all three key US stock indexes are performing well, with both the S&P 500 and the NASDAQ pacing at record highs before the long holiday weekend.
S&P 500 hits another record high after better-than-expected June jobs report https://t.co/aEBJ418JmV
— CNBC (@CNBC) July 2, 2021
Ahead of the Jobs Report on Friday morning, gold spot prices had recovered the majority of the losses taken earlier in the week, and the yellow metal’s initial reaction to the employment data was a resurgence in the reflation rally that drove prices higher for much of Q2. The price per ounce of gold reached as high as $1795 before running into resistance and then reeling back more quickly around the start of cash market trading. Precious metals trading has calmed alongside much of the market since mid-morning, and gold looks set to close at a decent premium to the week’s starting prices.
- Gold’s inability to continue or hold the initial gains this morning likely comes down to two factors. First, while gold was able to participate in celebrating the good news that the economic recovery continues to progress, signs of a steadily improving labor market draws us closer—by small steps, but steps nonetheless—towards the Fed tightening financial conditions in the future. It seems that, given time to process the Jobs Report data, markets came to this same conclusion. Above virtually anything else, signals towards tighter Fed policy put a considerable headwind against any gains for gold.
- Secondly, with gold still in search of a real motivating factor this summer (as we discussed in last week’s wrap) there’s probably a long line of traders happy to take profit anytime the yellow metal’s spot price rises to $1800/oz; Expectations being that there would be little natural support at or above the round number right now.
In the first half of this week we saw the possible repercussions of an asset like gold lacking a directional impulse during these slow summer months, Likely exacerbated by the combo of end-of-month and end-of-quarter repositioning, gold prices slid steadily through the first days of trading, dropping as low as $1755/oz before beginning to pare losses on Wednesday morning.
- We’ll keep an eye out for similar slides in the days ahead, as next week may well be the slowest and thinnest of the summer by virtue of a truncated trading week (markets are closed Monday in observance of Independence Day) and light data calendar with very little expected in the way of news.
- Still, you’d have to say it’s generally a positive sign for gold in Q3—looking past the summer—that prices recovered for the Monday-Tuesday slump quickly and in an orderly manner.
- On the calendar next week: An update to activity growth in the services sector of the US economy (the manufacturing variant slipped a bit as reported this week, but remained very healthy at 60,) and the discussion minutes from June’s FOMC meeting.
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 on Monday for our preview of the week ahead.