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.
Gold prices have ridden the tailwinds of the worst kind of geopolitical risk this week. Not only has the yellow metal consolidated a position well above $1900/oz but continues to move higher into the weekend.
So, what kind of week has it been?
Financial markets have been roiled and shaped in turns by the flow of headlines coming out the Ukraine as well as the seats of power in West and Russia while various government sanctions and threats have been lobbied back and forth. As the conflict has worsened in Ukraine it undoubtedly brings new waves of unease and uncertainty into investors’ minds and the marketplace with each passing day; but the resulting isolation of Russia’s economy—the 11th largest in the world—also has been rippling through the markets. Currency markets have seen on-and-off volatility since the week began with the confirmation that Russia’s banks are being cut out of SWIFT access, which has effectively denied Russia access to two-thirds of its’ reserves which are being held in banks outside of Russia; and even China is looking less willing to back Russia.
As equities (in the US and abroad) fell consistently for most the week, commodities in general have had one of the biggest weeks on recent record, also as a reaction to the Russian invasion. WTI crude oil moved above $110/barrel as the growing number of companies shunning the purchase of Russian oil (even without sanctions in place) has added a premium to oil produced elsewhere in the world.
Gold prices, meanwhile, have certainly benefited from multiple and aggressive tailwinds: with the sanctions now placed on its central bank, holdings of physical gold now make up a vastly larger percentage of Russia’s actionable reserves and this tension (and attention to how and when Russia may need to convert the metal to spendable funds) kept a floor and a push under gold even while investors’ expressed a brief rush of optimism mid-week and lifted stocks higher for day. The underlying worry about a hot and protracted war in Eastern Europe and worries about consistently and persistently high inflation (especially in the States) ensured that the yellow metal’s price chart remained well above $1900/oz at the lowest points and gold would still close the session nearer to $1930.
From there, gold’s price built up to the daring gains that we are counting at the end of the week. As most global investors’ attention was directed back to the war in Ukraine with no clear end in sight and equity markets resumed their tumble, gold rode mostly sideways as a bedrock safe-haven trade even though Treasury prices remained subdued and their yields elevated; and even possible resistance began to break on Thursday evening with reports of heavy fighting around the largest nuclear power plant in Europe. A full-on flight to safety (re)commenced and the bond price surged this time: the benchmark 10-year US yield plummeted towards 1.7% and, as Friday’s dawn reached US trade desks with news that the invading Russian army had made new advances, gold prices began the march higher, passing easily through $1950/oz before stock markets opened in New York.
Gold’s climb isn’t just about what’s come to pass around the marketplace this week; it’s also certainly driven by converns about the unknown immediate future. With markets nearing a close for the week, the war continues mostly unchecked in the Ukraine and, as rhetoric out of NATO and the US State Department take on a more aggressive tone, investors and managers are uncertain what the state of play will be when markets reopen on Sunday evening and are preparing as best they can by building their positions in cash, or in safe-havens like gold.
While the world’s attention has been (rightly) focused on Ukraine, and that has been the clear driver of market movement in gold and other asset classes important to gold, there have been a couple points of interest elsewhere that will be relevant to charting the path for gold prices when we reach the other side of Russia’s assault on its neighbor (hopefully sooner than later, and peacefully). While neither Friday morning’s Jobs Report, nor the guidance given by Fed Chair Jerome Powell did much to move prices around this week, they still reckon a mention here:
- Friday morning’s Non-Farm Payroll number came in well above expectations for a second week running, popping the headline count to 678K vs. an expected number near 400K. This is another sign of strong progress in the US labor market post-Omicron surge and the broader jobs recovery; if it seemed up in the air at all, one would expect this data point to lock-in expectations for the Fed to hike rates in a couple weeks’ time.
- Of course, it’s not really a question any longer, as, in his semi-annual testimony before Congress, Chair Powell not only nearly guaranteed a hike at the March meeting, but admitted his feeling that the central bank likely should’ve acted sooner than it did to combat the now-elevated inflation pressures in the US economy.
End of Week…
As Friday’s session comes to a close, there is always the likelihood of volatility into other close given the state of geopolitical risk in the world—although there’s probably a much lower chance of broad profit-taking against gold’s gains given that few of the investors and managers who bought into the yellow metal in search of protection will be willing to give it up before the weekend.
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.