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 are wrapping up this week at a premium of nearly $25/oz to Sunday evening’s opening bids, even having endured an important announcement from the Federal Reserve that represents a first active step towards a higher rate environment and the first optimistic US Jobs Report in nearly a quarter. Thanks to an FOMC that delivered as expected, a BoE that didn’t, and some strangeness in Friday’s Treasuries market, gold prices should head into next week with a solid foothold above $1800/oz.
So, what kind of week has it been?
Gold price charts saw relevant movement throughout the week this time, rather than saving all the action for the final sessions as we’ve seen over the past month; And when the yellow metal moved noticeably this week, it tended to move with pace.
The landing of Wednesday’s FOMC meeting and press conference, the macroeconomic showpiece of the week, didn’t engender a volatile move in gold prices because investors had already worked their jitters out earlier in the day. The first hours of US trading on Wednesday saw gold spot prices tumble from recent support around $1785/oz to a hard floor at $1760, as investors also dumped US Treasury positions and drove yields higher again. The benchmark US 10-year yield continued oscillating, but gold spot prices remained set to the lows pre-FOMC as investors and traders remained hands-off.
The FOMC’s taper announcement aligned closely with the consensus projection in global markets, and Chairman Powell’s comments and signaling in the Q&A that followed was well balanced, encouraging a moderate reaction from investors in most of the gold-correlated assets we regularly watch. This environment allowed precious metals prices to appreciate somewhat in the remained of Wednesday’s session.
On Thursday morning, just as US traders were spinning up for the New York session, the Bank of England shocked global bond markets by deciding not to raise rates—a move that had been seen and certainty by bond investors. The surprise inaction initiated a surge in sovereign bond prices not only for the UK but in US paper as well. The shift yanked Treasury yields from their post-FOMC highs and opened the door for gold spot prices—still highly sensitive to strong bond market volatility—to surge towards the vital $1800/oz level. Gold’s momentum petered out before breaking resistance in the market morning, but remained steady and consolidated most of its Thursday morning gains through to Friday’s market open in the US.
Counter to expectations following a strong October Jobs Report that was delivered pre-market, the start of cash trading in the US for Friday saw Treasury yields collapsing once again; This time, the 10-year Note’s yield dropped below 1.5%. And, as with Thursday’s moves, gold prices were a major beneficiary. The initial rally pulled spot prices above $1800/oz and the yellow metal has generally continued higher into Friday afternoon and the week’s close. (Some of the momentum behind gold on Friday might be attributable to a healthy pace of wage growth shown in in the October Jobs Report which, theoretically, could be interpreted as added inflationary pressure. It’s worth mentioning as a possibility, but, overall, it seems more likely that gold’s rally is a reflection of the strange day that the bond market is having, and investor relief to be on the other side of the November FOMC/October Jobs Report run.)
For an asset like gold and its precious metal cousins that can be so strongly influenced by the US Dollar and bond markets, it’s pretty tough to match the macroeconomic impact of a week that delivered both a pivotal FOMC meeting and an important Jobs Report; So next week’s calendar will feel relatively calm, although we do get an updated read on consumer inflation in the US. The closing session of this week represents a big step forward for gold prices. If bond markets settle down a bit—which is possible on this side of this week’s FOMC and BoE activity, but certainly not guaranteed—spot prices may finally be able to consolidate support above $1800 again heading into the final stretch of 2021.
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.