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.

Gold prices are closing this holiday-shortened week at a healthy premium to last week’s close, as inflation worries and a very tough week for the US stock market generated a tailwind of risk-aversion that overcame even a two-year high in Treasury yields mid-week.

So, what kind of week has it been?

There’s been an awful lot of movement in asset prices this week, not least in gold spot prices, for a week with a nearly bare economic data calendar and no news out of the FOMC’s pre-meeting quiet period. Aggressive moves in US Treasury yields have grabbed the most attention in this short week, and at times have had the biggest impact on pricing for gold.

The yield on the 10-year UST Note, a primary benchmark for US Treasury Yields, began the week with a strong upward trajectory and reached higher that 1.87% by Tuesday. It was the first time that the 10-year has reached those levels since January of 2020. Although the boring phenomenon of “market momentum” is both a little too easy to point to as a reason for yields reaching such a high peak, and a little too intangible to analyze in a way that’s useful here, it very clearly played a role in investors driving the 10-year to pre-pandemic levels. What is a little more concrete for us to point to as a driver in this week’s move is investors and money managers positioning for the possibility that the Fed might get even more aggressive still than was anticipated just a month ago: Some desks are projecting the 10-year will easy reach 2% as the FOMC may not only announce 3-4 rate hikes in 2022 (generally believed to be the most individual, non-emergency hikes that the central bank could get through the economy, safely, in a calendar year,) but may even push a hike of 0.50% in March (where the FOMC most often hikes in increments of +0.25%.) Growing expectations that hot inflation might also push the ECB to move faster towards hiking rates added fuel to the rising sovereign bond yields around the developed world as well this week.

Although historically—and certainly over the last six months—this kind of surge in Treasury yields has created a hostile environment for gold prices, inflation fears and sudden drop in the markets’ appetite for risk motivated an aggressive gain of more than $20/oz for the yellow metal on Wednesday. Investors tense disposition around inflation expectation has been a theme for most of January; Although there was little in the way of high-impact inflation data this week, the expectations that the Fed could be compelled to move hard against high price pressures did enough to keep those worries near the front of mind. Probably the biggest driver of the risk-off attitude that elevated gold this week, though, was the swift and steady drop in US equity prices in reaction to elevated yields. By the end of Wednesday’s session, the NASDAQ had officially entered a correction, but the pain was felt across all three major indexes this week.

That’s not to say that gold prices were entirely unaffected by dramatics in the bond market. The initial surge in Treasury yields was clearly keeping the yellow metal under pressure earlier in the week, holding spot prices below $1820/oz. And the corrective rally in Treasury bond prices that has carried through into Friday appears to be helping gold spot prices hold to a majority of its gains despite some headwinds from end-of-the-week profit-taking.

With the gold/yields relationships still proving to be relevant, we’ll keep tracking it into next week. There should be some notable moves in both asset classes again, as we turn towards the first FOMC meeting of 2022 (on Wednesday) and get some input from the Fed regarding the market’s increasingly hawkish assumptions.

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.