Happy Friday, traders. (*hiccup*)
What kind of (*turkey burp*) week has it been?
Thankfully it’s been a mild week of gold trading, and I hope you all have been able to take advantage of that and enjoy your Thanksgiving week with a lot of friends and family, and a least a little bit of over indulgence. (*wipes gravy-mouth*) I certainly did. Before we trundle back to our tryptophan comas though, lets take a brief look at what the markets showed us this week.
US Equities Stumble, US Economic Data Struggles to Improve
A rough run in November continued for US equity markets this week, in particular for tech stocks and the mighty FANG complex. This market weakness provided a cushion for gold prices throughout the week as spot traded a simple range between $1220 and $1230/oz. From where I sit, it looks a very positive signal for gold prices that it firmly held $1220 support through a week like this. While it’s true there were few real tests of the lower-bound (even the overnight sell-off we’ve woken up to seems to have lost most of its momentum before $1221,) but I’d argue there were also relatively few points in the trading week that provided a strong boost to gold as well. What that says to me is that the market fairly values gold at least at $1220/oz in a calm market, and with higher odds of geopolitical uncertainty rearing its head next week the spot market has built itself a firm base from which to vault past $1230 resistance in a risk-off market.
As for specific US economic data points, this week’s mild slate was for the most part nearly inline with expectations, if skewing slightly to the downside. Both new housing builds and existing home sales demonstrated a rebound from hurricane-stressed numbers in the previous month, but both also showed a decline as compared to the same month a year ago—not a red light for US economic pace, but the green may be switching to a yellow. Markit’s observation of manufacturing and service PMI in the US also produced tepid numbers, with the read for the manufacturing sector notching a three-month low for November. Again, I don’t think this is the kind of data that has analysts ready to call the turn-down for the US economy-- it’s certainly not enough to slow the Fed’s December rate hike or even the first hike in 2019—but it’s likely to start demanding traders’ attention.
The one outlier for me in US data this week was durable goods orders, which were expected to decline last month but in fact performed even worse than most anticipated and proved to be the one stumble this week that spooked investors into a risk-off/buy-gold rush with its release as some—including the OECD—are growing concerned that slowing capital spending may be the first indication that the American economy is beginning to strain under the pressure of White House-driven trade tension and a fading boost from fiscal stimulus.
Brexit Negotiations Progress but Add Uncertainty
Elsewhere, the Brexit rollercoaster continues to jerk and jolt along. The flurry of criticism against Prime Minister May, and cabinet resignations seemed to slowdown from the end of last week, and May’s Brexit plan received a stamp of approval from Mark Carney and the Bank of England—if a tentative one, as their full review of the agreement is expected next week. While we were enjoying our Turkey Day in the States however, things began to fall apart again.
It was announced on Thursday that PM May will be making an unscheduled visit to Brussels on Saturday to finalize her agreement with the EU, just 24 hours before the EU summit scheduled as the “sign-off” between the UK and the EU-27, which immediately ruffled some feathers—mostly German ones. As of this morning, the Spanish government is up in arms about last-minute changes that they say were made without their input, threatening to put their weight behind an effort to veto the entire thing. With this much potential for geopolitical sparks over the weekend, we could be barreling towards an energetic Sunday night/Monday morning open to gold markets; while an EU-27 approved Brexit plan would calm some immediate fears in markets around the globe, I don’t anticipate it being a catalyst for risk-on trading as it would do very little to make the UK parliament vote any less difficult for May to pass. Alternately, a collapse at this stage (that is, a failure to get the EU sign-off on Sunday) would almost certainly spike global markets’ fear and volatility and drive some strong risk-off positioning.
Here are some things we’ll be keeping an eye on next week:
- Trump/Xi trade negotiations at the G20 summit
- Brexit negotiations/progress
- Case-Shiller US Home Prices (Tuesday)
- US New Home Sales (Wednesday)
- US Personal Income (Thursday)
- FOMC meeting minutes (Thursday)
That’s it for this week as I’m off to cobble together a turkey sandwich out of leftovers and American ingenuity—the Moist Maker is calling.
Enjoy your weekend, traders. I’ll see you back here on Monday.