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 and silver prices are marching into the weekend with slight gains on their opening marks to begin the week. That modest delta doesn’t tell much of the story of this week, however, as both metals initially saw solid gains before a late-week flight away from safety pulled gold back towards earth.

So, what kind of week has it been?

US Equities Notched the Longest Rally Since August

Not long after our preview post went up on Monday, gold prices put in their top for the day just below $1840/oz. The yellow metal was generally supported near to that level, but did drift slightly lower through the day. Silver had a few extra bursts of momentum left, but was ultimately unable able to break above $27.50 and also settled slightly below its peak on the day. At the same time as gold’s momentum was tailing off, the rise in US Treasury yields bulled back as well. Trading patterns over the course of the week suggest that bond watchers and investors my generally see anything approaching a 2% yield on the 10-year note as “over-sold,” bringing buyers back into the debt market; Yields on the US 10-year dipped back to a low of 1.15% on Monday while the US Dollar gave back some of last week’s gains.

News flow on Monday was seen by investors as mostly positive and supportive of bullish outlooks for the US economy in 2021. Amid weekly reports showing a slow but steady drop in COVID-19 cases and hospitalizations, the market also happily read signals from the White House that the Biden administration will be willing to pass their proposed massive stimulus/relief bill without GOP votes if necessary. Investors’ and economists’ level of concern—whether genuine or performative is hard to say, though I myself think it’s more likely the later—about counterproductive levels of inflation resulting from a large fiscal stimulus appeared to come and go during the week. On Monday, at least, investors were mostly carefree and bit US (and global) equity markets higher; US stocks’ climb marked the longest unbroken rally since the summer.

As Investors Got Nervous About the Inflationary Boogie Man, The Market Rally Paused

While the pullback was mild to say the least, the US’ stock market rally didn’t make it past Tuesday morning. While there was little in the way of an abrupt cause for concern, equities traded indecisively around opening levels for the index benchmarks; the S&P shaded just into the red at the close of trading while the NASDAQ 100 was green by the same thin margin. Presumably, with the fiscal stimulus bill making steady progress through the legislature, investors rediscovered the traditional—if, again, unsupported—fear of inflation leading to a pullback in stocks. Precious few major assets saw a lot of buying on Tuesday, with the exception of a bid in US Treasuries as stocks fell in the morning.

In metals, a lose pattern emerged on Tuesday and carried on through mid-week: gold and silver both saw decent-to-strong bidding overnight, primarily in the heavy European trading hours, before the start of cash trading in the US session would bring heavy pressure on the precious metals resulting in a net loss in spot values, even as riskier assets like equities were weakening as well (albeit with less gravity.) On Tuesday, the overnight hours saw gold’s chart peaking around $1847 while silver was able to stretch its legs above $27.50/oz; As US-based traders took control however, both gold and silver fell out of favor before finding support at $1835 and $27, respectively.

Powell Does is Best to Upsell Fiscal Stimulus by Downgrading Inflation Fears

The immediate market reaction to the CPI read accelerated gold’s climb (and the bond market selling,) as both headline consumer inflation and the less volatile “core” calculation came in just below already muted expectations. Gold’s spot price, the clear favorite in the knee-jerk reaction, managed to break and (for a time) hold above $1850/oz while bond prices fell sharply. On the surface, the bid for gold looks incongruous to typical expectations as the yellow metal’s traditional investment role includes hedging against rising inflation rates; But the revelation of even milder than expected inflation pressures at present, in the view of investors, at least, weakens the opposition the White House’s large-scale fiscal stimulus package on the grounds that inflation will rise too fast in the medium term which, perhaps confusingly, suggests higher inflation in the longer term. Just as you might have had time to work through that logical loop on Wednesday morning however, it become temporarily irrelevant as the open of US stock markets brought sharp and strong selling pressures on the precious metals and a snap-back in the bond market: As Treasury yields collapsed well below 1.15%, gold prices fell back to $1840/oz while silver worked hard throughout the rest of the session to cling to $27.

Fed Chairman Jerome Powell’s public comments on Wednesday afternoon, in theory (assuming that the right decision makers weigh them appropriately,) should further grease the rails for passage of the Biden relief package as sized. The Chair made it very clearly in his statements that the Fed: 1.) will almost certainly allow inflation to rise beyond 2% for an indeterminate time in order to facilitate a stronger labor market long-term; and 2.) do not, even with the passage of large, desperately needed fiscal stimulus, see project such a consistent rise in prices until well into the future. Gold prices did see a brief pop during Powell’s remarks, but the commentary did little to impact other markets on a listless Wednesday.

A Sleepy End to the Market Week Sees Investors Pull Back from Non-Dollar Safe-Havens

Thursday’s overnight session was the final one before China and much of Asia (ex. Japan) shut down for the Lunar New Year celebrations and for many traders effective marked the end of the week. Gold-longs perhaps would’ve liked the markets to have packed it up early as a whole. Gold’s daily morning sell-off, while delayed a bit past the start of equity markets’ trading, was the sharpest of the week. Previous support around $1840/oz had vanished as equities were losing ground as well; It wouldn’t be until a low near $1825 that the yellow metal found some support midday, skimming along that floor through the rest of the session. Silver’s fall was less spectacular, but the white metal did lose grip on the $27 handle.

The only other high-tier economic data we were looking out for beyond consumer inflation data was the weekly read on the labor market via Initial Jobless Claims. US markets seemed unsure how to interpret the numbers on Thursday morning: the count of new unemployment claims did fall compared to the prior week, but only on a technicality: This week’s number was certainly higher than expected, and only represents a week-on-week decline because last Thursday’s data had been revised significantly higher—back above 800K, in fact. Investors perhaps leaned into the negative over the positive initially, as the major stock market benchmarks tumbled along with gold in the morning. But equities made a decent recovery in the second half of the day and would go on to snap the (very mild) two-day skid.

With little-to-nothing in the way of relevant news or data, Friday’s trading had not been any kinder to gold. The yellow metal continued to fall overnight with very little Asian buying power to support it, and has spent most of the week’s final trading session below $1820/oz. The main headwinds against gold have been the old favorite as the US Dollar is rising steadily. Outside of the surging Greenback, interest in traditional safety plays is receding overall as investors have been selling US Treasury debt with both hands, once again pushing the US 10-year yield to the precipice of 2%; Meanwhile, the US equity markets’ late-week rally continues to be as muted as the mid-week slide. Silver prices have been having a more successful day than their usual partner, and look likely to close the week once again above $27.  

Next Up

Next week’s trading calendar stars with a Monday holiday (for Presidents’ Day in the US,) and action doesn’t really take off from there. Retail Sales data will likely be our biggest data point, and I’ll be interested to see the discussion minutes from the most recent FOMC meeting, released on Wednesday. The lack of scheduled data doesn’t presuppose a calm market, of course. Presuming the second impeachment trial of Donald Trump is wrapped up (or close to it) by Tuesday, all eyes and effort will be on the efforts to pass the Biden administrations COVID-19 rescue package.

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 our preview of the week ahead.