GoldPrice.

Happy Friday, traders! Welcome back to our weekly recap of the last five trading days in precious metals and currency markets.

Gold prices are trading roughly $5 below their start to the week, now looking to close Friday’s session just north of $1460/oz in the sport market; silver, having managed to stay above $17/oz for most of the week now may be threatening that level of support. As anticipated, this trading week was dominated by the narrative and outlook around US-China trade talks that seem to have slowed, if not stalled outright.

So, what kind of week has it been?

Gold Prices Looked Solid on Monday as the Market Grew Tired of Stagnating Trade Outlook

We alluded to it in our weekly preview piece: as US trading got started on Monday, the market environment looked much like had at the end of last week. Trade talks remained the dominant market driver, with occasional headlines on the growing chaos around the pro-democracy protests in Hong Kong and the continuation of impeachment hearings in Washington. It remained the case that there was just enough positive-sounding chatter to provide a life-line for those expecting an initial trade agreement before Christmas, but the lack of strong corroboration (at least at the start of the week) seemed to be dulling the shine of any pops in trade optimism and risk appetite.

Despite the Dollar slumping a bit on Monday, stocks were mostly in the green and all three major indices set new highs, but these “records” are becoming more and more meaningless as they are marginal at best, and don’t seem to be supported by any material improvement in the economy or the environment for risk-taking. I think one important point of evidence for this is the yield on 10-year Treasury debt, which has failed to find much momentum even when positive headlines for trade talks emerged; as well as the mostly uninspired performance of equities in the days since Monday.

There was one new story that broke Monday morning which I initially thought might have more of an impact on this week’s market:

Woah - Fed discloses previously unknowon meeting between Powell and President Trump this morning: https://t.co/hmRRV8Ckof

— Eamon Javers (@EamonJavers) November 18, 2019

In the time and trading sessions since Monday morning, I’ve mostly lost interest in discussing this story now that’s become clear it didn’t have a lasting impact on the metals market. There are plenty out there covering the gold market who seemed keen to push the idea that this meeting suggests that Donald Trump will pressure the Fed into further rate cuts—as of right now, I think that’s just nonsense. It seems clear that the Federal Reserve disclosed the meeting specifically to dampen any unfounded expectations for further easing in the near term.

By lunchtime on Monday, whatever risk-on mood had been putting pressure on gold prices was taken off and the yellow metal’s spot value trade back above $1470/oz while silver regained a position above $17/oz; with few exceptions, both metals would trade in a waveform around these levels through Tuesday’s book of business. That doesn’t mean, of course, there weren’t a handful of points worth noting from the market day.

Equities markets looked primed for another day of gains and gold prices sank into a trough at the start of the market day in the US, boosted partially by an increasing number of major bank forecasts for 2020 that anticipate an end to the drag that trade conflict has been applying to the US economy. With no actual concrete evidence of improvement, however, the good feelings disappeared as cash trading started for the day: stocks edged lower as the yield on the 10-year Treasury broke below 1.8% and gold prices rose back from their breakfast-time slump.

Gold Prices Move Higher Mid-Week as Chances for Trade Resolution Seemed to Dim

The biggest market impact felt on Tuesday came at the end of the day, with the news that the US Senate had unanimously passed a bill in support of Hong Kong’s pro-democracy protestors. This is important to the dominant market narrative because the Chinese government has made it clear that they would not react well to this kind of bill being signed into law and reasonable expectations are that China would exercise their displeasure via ongoing trade talks. Gold prices immediate jumped at the global market re-open, trading higher throughout the overnight sessions and briefly taking aim at $1480 before turning back. Indeed, what seemed to be a set pattern for the week repeated itself as metals prices pushed lower through the first hours of US trading.

As before, it appeared that the weakening of safe haven assets like gold was propelled by chatter around US-China trade developments, and really unconvincing chatter at that—I mean, look at this headline. It was hard not to notice that despite the feigned optimism in risk markets, bond prices were not selling lower as gold had; it looked like a third-consecutive burst of risk appetite that would eventually fall back.

Sure enough, a midday Reuters story forced the turn.

Dow drops 200+ points after Reuters reports a phase one China trade deal may not get done by the end of the year https://t.co/C4b8UwKTN8 pic.twitter.com/qq5tWb8FzG

— Yahoo Finance (@YahooFinance) November 20, 2019

With stocks breaking lower en route to a losing session across the board, gold priced rebounded swiftly to $1475/oz, although the yellow metal would correct closer to $1470 thanks to some positioning ahead of FOMC minutes. As we discussed in our recap on Wednesday, the price of gold (and prices for other correlated assets) was largely insensitive to the release of discussion notes from the Fed’s October meeting. In my mind, the minutes fulfilled one primary role for gold and Dollar traders: it cemented the broadly held assumption that the central bank will keep policy rates on hold through the end of 2019 at the very least.

At the global commodities market re-open on Wednesday evening, the safe havens took one more strong gap higher, with gold prices jumping nearly $5 in initial trading. Trade news was the culprit, of course. This time, it was a result of comments by Donald Trump acknowledging there has been a slowdown in negotiations and, unsurprisingly, laying the blame entirely at the Chinese feet.

Positive Trade Talk from China has Brought Risk Appetite Back to the Market, Lowered Gold

Many market observers, myself included, were bracing at this point for, at best, confirmation from the Chinese side that talks were faltering or, at worse, an retaliation-in-kind for the US President’s claims. Instead, Chinese officials struck only positive tones about both sides’ efforts to build an initial agreement. This change in the news flow brought the first concrete swing of risk-on trading into the gold market alongside the start of Asian equities trading and began a slide in prices. Searching for a level of support, the yellow metal managed to turn briefly higher a handful of times through the European session (on some ugly moves in major Euro equities) and the US morning hours (on another 220k+ number for Initial Jobless Claims;) but gold would fail to recover on the day, particularly as bond prices began falling on the rumors—and then the confirmation—that Trump would sign a short-term spending solution to avoid a battle over government funds (and a potential shutdown) until the very end of the year. Driven by the rise higher in Treasury yields—even as equities took another daily loss—gold prices fell to and through previous support at $1465/oz. Silver managed to hold its line above $17.

Market optimism and a general “good mood” persisted as trading rolled from Thursday afternoon into Asia’s Friday session. Gold prices saw a spurt of risk-off buying out of Europe as both the combined currency zone and the UK continued to show worrying signs of stagnation, but a set of rare public remarks on trade negotiations from the Chinese Premier described the path forward in a tone that was slightly more hopeful than concerning; with the markets turning towards the final US session of the week, bond yields (accompanied by stocks, this time) and the Dollar moved higher as gold prices retreated back towards $1470. At this point, I think it’s fair to say that the markets as a whole are more willing to buy optimism sold by Chinese officials, while being largely wary of claims from the US administration.

In what looks to be the final meaningful move of this trading week, news broke this morning that the US President is considering vetoing the bill to act in support of Hong Kong’s protestors; it is very clear, given the large support that even the Senate controlled by Donald Trump’s own party has for the bill, that this would be a move made solely to placate the Chinese in trade talks. As such, the markets have remained relatively optimistic about trade as we head into the weekend. All major US indices appear pointed towards a win with Treasury yields higher, while gold prices—likely taking a hit from the standard end-of-week profit taking of short-term positions—push lower towards $1460.

Next Up

With Thanksgiving punching a hole in the US market schedule, next week will be a bit of an odd bird (pun intended.) The front of the week will be a little more loaded up on the data calendar, with Wednesday carrying the biggest weight while bringing an updated look at the Fed’s preferred measure of inflation. We also await a decisions from the US House of Representatives on whether they will continue this round of impeachment hearings or move on to the next phase, and of course the US-China trade negotiations will be a dominant factor as well—all though, I suspect that, aside from the Hong Kong support bill now sitting on the President’s desk, there will be little happening on that front during a holiday week.

Until then traders, get out there and enjoy your weekend. I’ll see everybody back here on Monday for a look at the trading days ahead.