Happy Friday, traders. Welcome to our weekly market wrap, where we 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 other key correlated assets—and may continue to into the future.
Gold prices are slinking back to a level that is perhaps more “neutral” on Friday, peeling away large strips of the price gains made in recent weeks.
So, What Kind of a Week Has it Been?
These last several trading days have certainly been a setback for the gold market relative to the last few weeks that saw spot prices for the yellow metal driving to (and occasionally through) the key level of $2000/oz. Even in that bull run, however, gold was never able to set a foothold above that psychologically important line, and this opened the door to the backslide we’ve seen in gold as of Friday morning.
For most of the week, gold was not pulled down by any particularly negative input but rather by that general lack of any input altogether. The macroeconomic calendar this week was devoid of the usual market-moving data points. And so, without any new tumult (for the time being) out of Washington to stir uncertainty about the US government keeping the lights on, and with financial markets (if not the broader power centers of the developed world) having become shamefully indifferent to the continuing conflict in Gaza, the tailwind that gold prices enjoyed for much of October’s trading vanished. The best outcome would have been for the precious metal to quietly hold its line just below $2000, but relatively early on Monday, that outcome already looked unlikely, with many traders and managers opting to take a profit and cash out of long positions. With most market activity netting out to the sell-side, gold spot prices shifted lower to $1970/oz by the close of Monday business.
The velocity of gold’s decline eased through Tuesday and Wednesday, but the market was clearly expressing some disappointment that the yellow metal had again proven unable to break meaningfully above $2000/oz or to hang on to the majority of a multi-week rally without fresh motivators. Even if spot prices seemed to steady above $1950 for these two trading sessions, there was a lowering ceiling on any potential rallies until Thursday morning.
Thursday goes down as the oddest trading day of the week, though it’s ultimately a lesson in the old trading adage of “buy the rumor, sell the news.” Especially when it comes to gold and the FOMC in the current monetary cycle, gold prices saw a strong rally Thursday morning as New York markets opened for cash trading. The consensus read was that this (among other moves in the US Dollar and Treasury paper) was the market pre-positioning for public comments due later in the afternoon from Fed Chair Powell. Based on gold’s sharp increase to $1965/oz before lunchtime, the market was clearly looking for Powell to replicate the somewhat dovish tones of last week’s Fed meeting and further suggest that we’re reaching the end of the hiking cycle. Instead, at the podium on Thursday afternoon, Powell struck a much more hawkish position, going as far as to state outright that the central bank is “not confident” that it has done all that is needed to drive inflation to the 2% target. The disappointment of the investors and traders that had staked out their positions on Thursday morning was felt quickly but with only a minimal amount of live trading time left in US markets. Around the time of the New York close, the gold spot had shrunk back to the neighborhood of $1955.
Given time for global markets to digest Powell’s comments, Friday’s trading began with a steep downward slide for gold, perhaps more than any other major FOMC-sensitive asset class. Despite what looks to be a positive close to the week for US stocks, gold prices have slid throughout the final trading session of the week, shedding roughly $20/oz. (This trend has been encouraged on Friday by additional remarks in the same vein from San Francisco Fed President Mary Daly and also by a relatively thin market as many desks are quieter than usual due to the Veteran’s Day holiday in the US.)
Where the gold market will move to next week will, of course, be determined in large part by how much lower prices may have to move before markets close for the week, but at the time of writing, the spot price sits near $1935/oz. Beyond the metal’s starting position on Monday, the direction of next week’s market will be indicated soon after, with a key update to consumer inflation data due on Tuesday morning.
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 next week for another market recap.