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 may continue to into the future—as well as the charts for silver, the US Dollar and other key correlated assets.

Despite ascending to record highs on Tuesday, gold prices are ready to net out the week with only a moderate gain against Sunday evening’s opening bids.

So, what kind of week has it been?

As the war that began in February with the Russia invasion of Ukraine has raged on, investors and money managers across the world’s financial centers have started to process and project what the ramifications of this conflict—beyond the obvious atrocities of war—might mean for economies in the US and abroad that were already working to ease inflation in the “post-pandemic” cycle, and the resulting fluctuations generated a very wide and looping course for gold spot price this week: The yellow metal’s chart for this week will ultimately have a high/low delta of nearly $1000/oz.

The rough treatment of equity markets that dominated the start of the week seemed to be a result of investors’ gloomy mood as there appeared to be multiple mounting downside risks that only increase in gravity as the conflict in Europe drags on. The aggressive risk-aversion that trounced stocks on Monday and Tuesday (and, here on Friday afternoon, see US stocks ready to close another week in the red) was a boon for gold, which saw prices rocket through a historical line of resistance at $2000oz en route to highs well beyond, which set an all-time record for gold prices in the modern marketplace.

The fear of “stagflation” in the US economy—an unwelcome state of play where inflation remains high while economic growth wanes—appears to be moving to top of mind for many managers and investors this week. It’s fitting, in a (depressing) way, that this would come to the market’s attention now: The last time the US economy experienced a true period of stagflation was during the energy crisis of the 1970s, and here this week the energy market (particularly crude oil) has been at the front of everyone’s minds. (Especially following the US and the UK announcing bans on importing Russian oil.) Of course, the specter of any truly negative impact of inflation tends to always be a major tailwind for gold prices with investors flocking to the precious metal as a traditional protection, as we saw this week.

There worries of money managers and economists goes beyond just the specter of inflation that has seemed ever-present of late: With the Fed poised to start raising rates to battle the highest levels of US consumer inflation in decades (effectively: obstructing US economic growth,) the war in Ukraine—and the attendant sanctions against the Russian economy, and disruption to vital (and already tangled) supply chains—threatens to continue driving inflation via higher commodities prices and scarcity of end products, and also to further hinder economic growth worldwide via the same inflation, and supply chain disruption.

The shorter version: The Fed (and other, more pernicious factors) may end up slowing the US economy, while we may have to wait longer for inflation to cool as hoped.

With these pressures driving the most of the notable moves in markets (alongside the more pervasive geopolitical risk concerns that we are now learning, from experience, come from the reality of a ground war in Europe) and the resulting turmoil in equity markets across the developed world, commodities markets across the board enjoyed a spectacular run on Monday and Tuesday. Crude oil saw considerable price gains even before confirmation of the ban(s) on imports from Russia, and certainly after. But it was the metals markets—industrial and precious groups—that saw some of the most notable surges: while West Texas Intermediate cruised above $120/barrel, nickel prices surges so high that the London Metals Exchange was forced to halt trading, at the same time as gold prices soared to all-time record highs, well above $2000/oz (and even $2050.)

Curiously, during Wednesday’s trading sessions, for no concrete reason that can (so far) be pointed to, markets have had a change of tack and appeared to be buying the dip (in equities) and/or selling the tops (in the commodities spaces.) The Dow is up by more than 600 points in the midweek session, and the S&P managed to turn out its best single-day swing in well over a year. The surge in commodities endured a dramatic pull back, with WTI giving back more than 10% on the day; and gold collapsing to support just below $2000/oz.

Even through the mid-week u-turn, the market for US Treasury paper has been the only key asset to move in a single, mostly un-altered direction. Since the start of trading on Monday, likely in anticipation of next week’s FOMC meeting which is expected to officially start the Fed’s hiking cycle for 2022, bond prices have fallen and lifted their yields in an unyielding march that has brought the US 10-year Note’s yield to linger right alongside 2.0%.

It was gold’s failure to consolidate or to continue drawing buyers north of $2000/oz that let the wind out of its sails after Wednesday’s trading. The gold chart has made some sporadic attempts to regain that key level and build a foothold, but with little success. As investors have been wondered if the turmoil and risk coming from Eastern Europe might have been overpriced into the equity markets, they also seem to be questioning if the current state of affairs might still not justify record high prices for gold as a safe-haven.

The one stretch during which gold looked like it might regain $2000 came on Thursday morning, as the markets in general had a surprisingly “normal” reaction to the February CPI numbers, which came in on-target to expectations for headline inflation to remain at 40-year highs. The data set put paid to Wednesday’s brief rally in equity markets, and noticeably rejuvenated gold prices for a time and yet more investors sought out the tried-and-true inflation hedge.

Ultimately though, the weakening of the early week surge for commodities and investors’ waning interest in trying to drive prices above $2000 left gold without the needed support to continue the rally, and its chart has traded mostly sideway through the final session of the week.

Thoughts on next week: 

That said, already we’re looking for the gold market to move again next week—especially on Wednesday and in the run up to it. March 16 brings the end of the FOMC’s next meeting and (almost certainly) the first rate hike in more than two years, ushering us into a new (and suddenly more unclear) cycle for the US economy. The Fed will also release updated economic projections next week, and from those data points, as well as Chair Powell’s post-meeting Q&A session, we will get a better sense of what class and degree of risk the central bank believes that the war in Ukraine poses to the US economy.

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.