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.

As unlikely as it seemed on Monday morning, an otherwise as-anticipated summer week of trading is closing with gold prices not only having recouped the big loses that set a sour tone just four days ago but standing to close the week’s book of business at a premium to the August 6 close.

So, what kind of week has it been?

Although there has been the occasional run of heightened volatility, this week’s trading has moved mostly by-the-book while economic data has matched consensus projections. The US stock market, as measured by the trajectories of its three benchmark indexes, is closing a fairly orderly week with the Dow and the S&P both eyeing “new record highs”; In a stretch with few headlines that rose to the level of impacting the general mood of financial markets, the Dollar and gold prices have largely traded as-expected in reaction to the week’s scheduled economic data.

At the start of the week, we pointed out that one point of pressure for gold prices in the coming days would be the stabilization (or lack) of recent runs in US Treasuries. We talked about a yield of 1.3% on the 10-year Note as an inflection point, given that gold prices had been falling especially fast any time the benchmark approached that level.

• It seemed as if gold’s only opportunities to recover the remainder of Sunday night/Monday morning’s steep losses would have to come from Treasury yields falling away from that mark and pulling the US Dollar back with it.
• Instead, by mid-day on Tuesday it appeared that investors simply recalibrated their strategies for the week around a US 10-year yielding above 1.3%. Rates didn’t pull back dramatically all week (until Friday morning’s Consumer Sentiment report, which we’ll get to,) but the rebalancing act allowed prices for the yellow metal to consolidate ahead of Wednesday’s inflation data.

The mid-week report on consumer prices gave gold’s chart its first big push on the road to recovery. The data’s initial release saw the yellow metal’s spot prices jump sharply higher, gaining as much as $10/oz in the first minutes. After some back-and-forth chop that followed, by lunchtime, with stock markets open and trading humming along, gold had climbed a bit further and would consolidate gains just above $1750.

• While the top line year-over-year numbers, as anticipated, remained at the post-GFC highs that have marked inflation data this summer, comparisons to the monthly price increases of June, May, and prior—as well as some more granular looks at the numbers—lent some solid evidence to the Fed’s consistent argument that Q2’s surging inflation pressures are temporary.
• Since this goes some way to clearing the path for the FOMC to—as they’ve planned and projected—hold interest rates at near-0%, it’s a solid boost for gold’s value and price outlook. Hence, the strong performance since Wednesday.

Once investors and markets, golds included, sorted their reaction to the CPI inflation data, gold prices settled and consolidated the recovery to $1750 across Wednesday night and through Thursday’s session. Despite the midweek momentum, it was unclear that the yellow metal’s rally could find more legs without a new catalyst before the end of the week.

For the second consecutive month, the University of Michigan’s Consumer Sentiment Index, managed to shake markets out of the usual Friday morning malaise. The measure of the US consumer’s mood fell to the lowest level since the darkest stretches of the pandemic in 2020, and indeed the lowest since 2011.

• The reason is clear: driven by the tougher to contain Delta variant and a dire bottleneck in the effort to vaccinate more Americans, the coronavirus that shut down the global economy last year is making an aggressive resurgence. In response, recent weeks have seen major US metro areas take the first steps of reinstating masking mandates to try and curb the surge.
• The deep dent in consumer sentiment is led, no doubt, by many Americans’ understanding that if the current efforts fail, the only thing that can come next is a return to harsher restrictions that will choke economic activity again.

Although US equities have been generally unbothered by U of M’s data set beyond a brief shudder Friday morning, the response in yields, gold prices, and the Dollar has been the typical “risk-off” swing. Bigger positions have been moving into gold and US Treasuries—Friday’s most attractive safe havens—while the Dollar is sliding to weekly lows.

• The rising price of the 10-year Treasury Note, likewise, has pushed the 10-year yield to the lowest levels this week, back below 1.3%.
• Similar to the feedback loops that we saw last week, gold’s risk-off rally has been accelerated by the Dollar’s falling off at the same time. As a result, gold’s climb has been super-charged and as we head into Friday afternoon it looks as though what began as a week of deep losses for the yellow metal will close with prices having risen on-net.

Of course, with the 10-year yield having fallen away from 1.3%, as we head into next week traders will want to keep an eye on how gold’s velocity might change.

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.