GoldPrice.

Happy Friday, traders. Welcome to our weekly look back at the last five trading days in precious metals and US Dollar markets.

At the time of writing this afternoon, gold is down considerably for the week at the end of Friday’s trading despite having rebounded slightly from the weekly and daily lows.

The dominant markers of this week have been an appetite for risk that has surged through markets amid some vague (if persistent) optimism about a trade resolution between the US and China.

So, what kind of week has it been? Well, a hectic one for gold markets; one in which the requirements of trading the metals markets this week has severely cut into the time I’ve had to write about the metals markets. So, I hope you’ll forgive a briefer-than-usual wrap up this time.

Weakened Gold Prices Persisted on Monday

When I left you on Monday, it was with the thought that gold’s rally seemed completely exhausted with the yellow metal trading lower (around $1500/oz, at the time) despite a list of macro and geopolitical inputs that traders would typically match to higher-priced safe havens. So, it wasn’t terribly surprising to see gold prices collapse lower on Monday afternoon as equities and the Dollar had only strengthened. The overnight trading in Asian markets set the week’s first floor around $1490/oz; another rash of pessimistic headlines around Brexit negotiations helped send gold on a rallying run back to $1500 an ounce that would continue on through the US session.

Sluggish PPI, Slowing China Talks Propped Gold Back Up Mid-Week

There were two key drivers of gold’s strength during Tuesday trading: the US’ blacklisting of an additional 28 Chinese tech businesses, and a poor showing from producer price inflation for September. The first, while not tied directly to the US-China trade tensions or this week’s high-level negotiations, certainly appeared to slim the odds of progress towards a trade deal in the near term; the later injected a little bit of fear that overall inflation could be sliding backwards alongside other parts of the US economy. Gold prices would briefly threaten support at $1500 mid-day, but equity market shakiness would help support higher levels through to finish the day.

With the calendar turning to Wednesday, a strong day for European equities would pull gold prices back a bit, but by the time the US was coming online for the morning markets were digesting rumors of a preliminary trade agreement being reached between US and Chinese negotiators that the US president was already declining to sign. Gold prices on Wednesday traded steadily in the $1505-1510/oz range up until—and through--the release of the latest FOMC meeting minutes. For a more detailed discussion of the minutes and why metals markets were largely unmoved, see our recap piece here.

Gold Prices Collapsed on Thursday Under Steady CPI, Turnaround in China Talks

Gold prices reached their highest levels for the week briefly on Wednesday night, failing to find a toehold at $1515 or higher. Thursday morning, gold prices would again tumble below the vital $1500 line, this time possibly for the foreseeable future. Trade-talk optimism has already rallied and given US stocks and Dollar indices a lift heading into the end of the week. With the added focus that Wednesday’s FOMC discussion minutes had directed towards Thursday’s consumer inflation numbers, the middle-of-the-road data set was enough to boost risk appetite higher and the pulled prices for the yellow metal initially down to support and then ultimately as low as $1490/oz. 

You could be forgiven for being a little confused by that reaction, if you were just looking at the headlines around the CPI release compared to markets’ reaction. Curiously, the coverage seemed to focus mainly on the data being slightly below expectations month-to-month, while the market’s reaction was to the higher-level view that inflation appears to be continuing at relatively the same pace as when the FOMC was so divided over the need for a September rate cut. I believe the market’s focus is the correct one—I don’t think there’s anything in the September inflation data that would convert an FOMC hawk to a dove.

Friday Finds New Lows for Gold, but Prices Rebound Just Before Market Close

The price of gold surged in the early hours of Friday morning along with oil, on the news that an Iranian oil tanker had been attacked. Adding to the momentum of the fear trade, Iranian representatives initially blamed the attack on Saudi Arabia—a claim they have since retracted.

The Friday trading session in the US saw equities and other risk assets running healthy and higher, as stock markets gobbled up rumors that the US and China trade delegations’ talks had somehow turned a corner and were headed towards a preliminary agreement that would see the tariff increases scheduled for next week pushed back (or cancelled.) With stocks surging, gold prices fell to a new low of $1480/oz, the “phase one deal” was finally reported Friday afternoon.

Gold prices managed to hold steady above $1480/oz following these reports, indicating both that the news was fully prices in and that that level appears to be decent support—in fact, prices traded upwards closer to $1490 to wrap up the week. It is worth noting, however, that a strong performance in Friday morning’s Consumer Sentiment data was enough to drag the yellow metal down to $1475, so going into next week I will be wary that another strong run for risk appetite may push gold into deeper losses for the month.

Next Up

Next week’s macro calendar is fairly light, with some retail and manufacturing data leading the docket for the US economy. Hopefully, that will give us some breathing room to discuss the outlook for the FOMC and other important influences for metals prices as we head towards the end of the year.

Until then, enjoy your weekend, traders! I’ll see you all back here on Monday for our weekly preview.