GoldPrice.

Gold prices appear healthy in Friday morning trading. However, the moderate rally we’re seeing comes at the tail of a decidedly brutal week for the yellow metal.

So, What Kind of a Week Has it Been?

An adjustment in the market’s expectations for the Federal Reserve’s policy plan, that is, the central bank’s intentions to raise interest rates higher still and hold them there for a time, going into 2024, has been the dominant driver of multiple asset classes this week. Gold has been far from the least impacted among them. Because the adjustment has been towards projections for more than one hike potential remaining in this cycle (thanks largely to this week’s commentary from FOMC officials) and, through a longer lens, expectations that the “neutral rate” to which the Fed will eventually cut down interest rates (thanks to messaging from last week’s Fed Day and updated staff economic projections) the pressure on gold prices has been strong and of a single direction: downward. At the same time, bond prices have fallen sharply (pushing yields to highs of over a decade,) and the US Dollar’s position against its primary trading partners— already elevated in 2023— has made its way to a 10-month high point.

It has developed that the face of this week’s Fed Speak has been Minneapolis Fed President Neel Kashkari. This is often the case, given Kashkari’s ability to communicate clearly to the general public and through the Media. In this case, the Minneapolis Fed chief took two avenues— an essay published by his office, followed by a televised interview— to question aloud whether or not the FOMC has tightened financial conditions (read: raised rates) “enough” to truly cool down inflation. This kind of rhetoric has been digested, rightly, by the investors and the marketplace as a suggestion beyond the possibility of just one more +0.25% rate hike this year, but that Kashkari (and others) may push for extending the ramp in the Fed’s rate policy. Unsurprisingly, Wednesday is when we saw gold prices break below $1900/oz, the descent picking up momentum, before putting in what looks like the weekly floor around $1860.

Thursday morning marked the depths of gold’s steady decline through the week, as prices for the yellow metal— in both the spot and the futures market— dropped to new six-month lows with the downward pressure (or, depending on your view, a vacuum of indifference towards the safe haven) only deepening. Even though the broader markets saw a respite from this week’s surging US Dollar, US Treasury yields, which have continued to be the primary driver in trading since Monday, reached a 16-year high. Eventually, the gold chart steadied a bit as the pause in USD’s bull run did create a faint pulse of support, thanks to making gold somewhat cheaper for overseas buyers. One question going forward through Friday’s session and into next week will be whether the gold market can take advantage of this slowdown and consolidate a position before falling too far away from the $1900 level.

At the start of Friday’s US trading (so far,) it does appear that gold is steadying the ship. Largely unbothered by the release of PCE inflation numbers in the morning (which never seemed likely to deliver a surprise anyway), the yellow metal has held serve and rallied back to nearly $1875/oz. This seems to be part of an overall market trend, as US equities have perked up as well. Gold’s rebound, though, looks steeply unlikely to prevent the metal from realizing a second-consecutive monthly loss. What the strength of this trajectory will be may become the question of next week, as the macroeconomic data slate thickens out considerably, with key ISM data and then the September Jobs report due in the coming days.

For now, traders, I hope you all have a safe, enjoyable weekend. We’ll see you back here next week for another market recap.