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 other key correlated assets—and may continue to in the future.
Here’s what you need to know:
1. Gold surged through most of the week as markets priced in hopes for a quicker end to the US and Israel’s war on Iran, helping spot prices climb from around $4,200/oz on Monday to as high as $4,785/oz by Wednesday evening.
2. That rally reversed sharply after a White House address signaled the military campaign would continue, driving the US Dollar higher and knocking gold down by roughly $200/oz between the Hong Kong and London opens.
3. Friday’s stronger-than-expected March jobs report added more pressure by reducing expectations for near-term Federal Reserve rate cuts and raising the odds that higher-for-longer policy could weigh on gold prices when markets reopen.
So, What Kind of a Week Has it Been?
Although gold prices were on the up-and-up for most of this week and at one point looked set to challenge resistance at $4,800/oz, events of the last 36 hours had gold falling sharply during Friday's session, which has been truncated in observance of Good Friday. The precious metal still marks a gain of roughly +$300/oz for the week despite spot prices falling by nearly -2% on the final day to $4,676.
Gold Climbed on Hopes for De-Escalation
For the first half of the week and well into Wednesday evening, gold prices moved steadily higher. The main driver appeared to be a repricing of expectations around how long the US and Israel's war on Iran, and its attendant spike in geopolitical tension and energy prices, might drag on.
This reevaluation was spurred primarily by statements and reporting coming out of the White House indicating a desire to bring a quicker end to the conflict, one way or another, with later reports even suggesting that the US executive was considering an end to the hostilities even without a full reopening of the Strait of Hormuz.
Combined with a steady flow of interest returning to gold hedging following the aggressive outflows that marked much of the month just ended, the yellow metal’s spot prices climbed steadily from $4,200/oz on Monday morning to reach as high as $4,785 by Wednesday evening.
White House Remarks Triggered a Sharp Reversal
Because the main catalyst for the early-week turnaround came down to the impermanent reality of the US President’s expectations and plans for ending the Iran war, the rally was always acutely vulnerable to a shift in rhetoric and narrative.
With a primetime address from the White House announced 24 hours ahead of time, markets were teed up on Wednesday night for what many thought might be a formal announcement of plans for the US to draw back from the Middle East. Instead, the President reiterated a commitment to carrying on with the military campaign until a tangible victory could be reached and went so far as to claim that Iran would be hit “very hard” in the coming weeks.
The market’s rejection of its recently regained risk appetite was swift and felt across many major assets. As the US Dollar spiked higher again, US equity futures fell sharply. Gold prices did as well, dropping by roughly $200/oz in the time between the Hong Kong and London market opens.
Prices stabilized as US traders came online for effectively the final trading day of the week, but spot prices have only managed to regain about half of the losses suffered on Wednesday night.
Strong Jobs Data Added Another Headwind
Several components of the global financial markets mechanism went online on Friday, despite most markets themselves being closed or trading for only half a day. This includes the scheduled releases of key US macroeconomic data, which may have us poised for another gold sell-off when markets return, in part, on Monday.
Early Friday morning, the US Bureau of Labor Statistics announced a shockingly strong month of hiring and job creation in March, with nonfarm payrolls printing at +176K versus an expected +60K.
Apart from the typical dynamic of strong macro data stripping back interest in gold as a safe-haven asset, this also bodes negatively for the yellow metal because it suggests a level of health in the US labor market and broader economy that moderates any perceived need for the Federal Reserve to resume lowering interest rates sooner rather than later.
In fact, it may even reduce the risk of the Fed needing to react dovishly if inflationary fallout from an extended Iran war were to intensify. This shift in probabilities around the timing—and now even the direction—of the Fed’s next move could compel investors to look for exits from gold positions once again. Of course, the great unknown in that equation is just what might transpire over the weekend.
Next Week’s Data Could Be Just as Important
Whatever shore we arrive on come Monday, next week brings another run of data that, alongside near-term developments in the Middle East, will have critical implications for monetary policy and the market’s evaluation of gold as an investment.
Key among them will be the release of the most recent FOMC meeting minutes on Wednesday and the oddly timed release of March’s CPI data on Friday morning.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I’ll see you back here next week for another market recap.
