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. 

Although not terribly volatile, gold prices have endured a week deeply in the red, shedding more than $100/oz at times between the top and bottom offers. 

So, what kind of week has it been? 

A new one with a familiar theme. Last week, it seemed as if the gold market was being dominated by traders and investors who were making a clear decision to buy into larger gold positions despite the adamant commentary from FOMC officials—Fed Chair Jerome Powell key among them—insisting that the US central bankers were still concerned about recently stubborn inflation, and still unbothered thanks to relatively strong US macroeconomic data, to keep their internal projections for the first Fed interest rate cut out of the near-term. As a result, gold spot prices rallied to new all-time record highs around $2440/oz.  

This week, the sentiment of the market consensus very clearly changed. It may have simply come down to a volume and supply issue. Last week, those looking to buck the Fed’s projection of higher rates for longer had some key economic data points to hang their argument on: the updated CPI numbers for April indicate that inflation has resumed a downward trend in the spring, while a miss to the downside in US Retail Sales growth suggest that the US economy as a whole may be starting to show deeper cracks forming under the pressure of tighter monetary policy. Since last Friday, however, the FOMC and their pulpits have been the only game in town. With no new data reports on the calendar that rose above the importance of the weekly Initial Jobless Claims number and a busy dance card of public appearances by key Fed officials, Jerome Powell & Co. were given plenty of room to state their case, being the only game in town.

While there was a long list of events hosting FOMC participants and publishing or broadcasting their remarks, the release of the meeting minutes and discussion notes from early May’s Fed Day served as a neat encapsulation of the theme. Ahead of the minutes’ release on Wednesday afternoon, gold prices had already begun softening at the tail end of a strong start propelled by the Monday sessions in Asia and Europe. The slide brought the yellow metal back within touching distance of possible support at $2400. However, on Wednesday morning, we observed a stronger swing into the “Sell” side of the ledger as traders and managers appeared satisfied to take profits on gold gains up to $2400/oz and began liquidating positions before the Fed could pull the floor out from under them. The accelerated selling drove gold spot through support with relative ease so that by the time FOMC minutes were released at 2 pm ET, the precious metal had slid to $2380/oz.  

The closer look into the discussion at the Fed in May did align directly with the positions that Jerome Powell and others have maintained since March: the central bank observes a stark “lack of progress” in the decline of inflation lately and will all but patently refuse to lower rates until that fact changes. Through the second half of this week, the market pressure from this has been amplified by a number of major analyst desks now stripping out their previous projections that the Fed will cut before late 2024. Because of the morning’s sell-off, the gold’s chart didn’t immediately fall post-FOMC minutes, but Thursday’s overseas trading provided an inverse of Sunday night/Monday morning’s rally as gold $2350/oz by the time cash markets opened in New York. The US session that followed was less severe for gold but did virtually confirm not only gold’s first losing week in nearly a month but its worst single week in five months.  

The question for next week will be whether gold has enough interest left at the current level to see prices consolidate. If this week represented all of the necessary re-pricing after markets got so far in front of the Fed, then there’s potential for prices to set a new (still very rich) base for trading into the final month of Q2. However, there doesn’t look to be any major data points riding to gold’s rescue just yet, as the last trading week of May will be truncated by Monday’s Memorial Day holiday in the US, and the biggest data set expected to report is the Fed’s PCE metrics for inflation, about which the central bank has already made its feelings well known. 

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.