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.
At the close of what's been a mostly positive week, gold prices are coming under heavier pressure on Friday morning, which looks to be pushing the week into a net loss vs. last Friday's close.

So, what kind of week has it been?

Gold's trading chart for this week has run a similar pattern to last week, which was devoid of any major market movers, either on the macro calendar or in the headlines: a healthy rally early on, flattened midweek trading, and then a weaker roll into the Friday session. And again this week, It can't be said there has been a lot going on for markets in a macro sense. The handful of strong out-performances from some very big names' quarterly earnings reports and the surprising busts by others have certainly made an impact on the bottom lines of traders in those specific names or sub-sectors. Still, from a top-down view of markets and, more specifically within the gold spot (and US Dollar) markets, it's been a bit boring.

Still, some of the more subtle shifts have been interesting. Top of mind since Thursday is how the first reporting of Q3 GDP growth for the US economy, even though it hasn't driven an acute, sizeable market move, seems to be quietly impacting trading patterns and investor sentiment that is weighing on gold prices at the end of this week and possibly moving ahead to a key few days next week.

Before Thursday morning's GDP, the investor mindset was once again in a more hopeful mood which provided a tailwind for the yellow metal. Buoyed by still-growing optimism that a pause (if not an outright turn) in the Fed's scorched-earth crusade against high inflation (after a +0.75% hike next week, presumably), US stock markets made decent gains in Monday's trading before a more aggressive rally on Tuesday in which the Dow, S&P 500, and NASDAQ all added at least 1% with ease. Gold followed suit: a moderate rise to open the week and signs of a strong interest in the metal, followed by the most vertical moves of the week on Tuesday, which brought spot prices to a weekly peak above $1670/oz. When Wednesday's session was more mixed, thanks to a few shockers from the top-tiers of the tech sector and the optimistic tilt to Fed projections starting to right itself, it was only the tech-heavy NASDAQ that took a notable loss on the day while the other indexes remained mostly even. Gold prices, not very sensitive to equities inputs at this point, mostly drifted in a narrow band around $1665.

This further step into a more hopeful outlook for markets to endure less pressure from high-and-higher interest rate policy in the medium term was not only being expressed through healthy investor interest in gold but also in a weakening of the (still-concerningly-strong) US Dollar. With the Dollar easing, to the tune of the USDX dropping to a 110-handle for the first time since the start of October and the 10-year Treasury's yield falling back below +4%, the broader commodities complex has also benefited this week. Most prominently, given the current focus on energy prices, crude oil prices have made hay out of the cheaper Greenback for most of the week while gold prices enjoyed the initial tailwind counter to USD, as well as the growing expectation for a looser rate environment.

A nice GDP report: The headline is 2.6% with consumers remaining strong (+1.4%).

But it also shows moderation in key respects that should reduce some overheating, specifically nominal GDP growth slowed to 6.7% and the Fed is successfully cooling investment, especially housing. pic.twitter.com/a1PlBAmcjv

— Jason Furman (@jasonfurman) October 27, 2022

Thursday's better-than-expected GDP numbers for last quarter have had a cooling effect on investors' feel-good sentiment. Despite being, overall, an objectively positive piece of news for the US (and global) economy, we're seeing a familiar reaction function as indications that last quarter wasn't as bad as "we" may have thought it to be, simply that there's room for the Fed to continue hiking and holding rates higher to curb inflation. While gold (and most commodities prices) continued trading sideways on the day, the more visible reversion in response to this is being seen in the stock markets, where the NASDAQ-- which is not only "tech-heavy" but, as a result "growth-heavy" and particularly vulnerable to higher-rate expectations--gave back more than 2%, underlined a shift in attitudes-- gold and the bulk of the commodities complex, and key stock indexes ran closer to flat on the day, but appeared to have lost their hopeful momentum.

The Dollar and Treasury yields didn't get a comparable boost in the other direction on Thursday, although USD is benefitting from its EUR counterpart flagging in reaction to the news from the European Central Bank this morning. For USD-- and so, for the gold market-- the sharper turn has come in the earliest hours of Friday's trading, as the consensus among analysts and economists appears to fully embrace yet another "triple hike" of 75 basis-points next week from the Fed. The 10-year Treasury's yield is flirting with 4% again, and the Dollar index is moving towards 111.0-- still well off its top, but strong enough to pressure gold lower. Gold spot prices, which clearly are not getting the same boost from Friday's PCE inflation report that was given it by October's CPI a couple weeks ago, are down steeply since this morning and may end up closing the week below $1650/oz.
From here, all eyes turn to next week's FOMC meeting, the expected rate hike, and the October Jobs Report that will follow. Compared to this week's quiet, it should certainly be a more entertaining run.

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.