GoldPrice.

Happy Friday, traders. It’s been a wild week for gold and silver markets, one that has seen the spot price for gold close Friday’s trading just below $1505/oz.

So, with no time to spare, what kind of week has it been?

Gold’s Monday Collapse Reversed by Recession Fears

It’s just the way it goes sometimes, but I think we managed to get Monday’s post up just before all the action started, as later in the morning the big swing of risk appetite that began the week pushed the Dollar index to another yearly high and the counter-pressure on safe havens saw the price of gold plummet to $1470/oz. The yellow metal’s spot price would skim that line through the rest of Monday’s session and into Tuesday’s book of business. Certainly the market as a whole was feeling optimistic and looking for risk positions Monday which contributed to gold price continuing to weaken, but I do think some degree of the sell-off’s velocity was created by timing, with institutional investors making some abnormal moves in an effort to position for the end of the month as well as the end of the quarter.

Gold prices found a bit of lift in the Asian Tuesday session. The RBA made its quarter-point cut to short-term rates as expected; the language in its statement didn’t have any remarkable insights into the stability of near China economies. That said, Tuesday night also felt like a significant escalation around the ongoing protests in Hong Kong and that theme has stuck around through the week. Similarly, the middle of this week was characterized by a continuous flow of reports and headlines related to the US Congress’ nascent impeachment investigation and the events that precipitated them, all of which seemed progressively worse for the US administration. The low-grade hum of instability coming from Washington and Hong Kong throughout the week certainly added a level of support to precious metals and other non-Dollar safe haven assets.

Early Tuesday morning, it looked like that line of support would be at the fresh lows that gold prices fell to in Monday’s trading; things would change. Tuesday morning’s release of ISM’s Manufacturing PMI dealt a sharp blow to FOMC hawks and US economy optimists, with the headline reading moving counter to expectations and falling further into contractionary territory. With a new vein of recession fear flowing through the markets, the Greenback was driven lower on the release as was the US equity market. Gold prices, in response, shot higher to recover most of Monday’s losses and regain $1480/oz; silver managed to rise back above $17.25 as well.

As the markets digested the negative economic signals and more unsettling headlines related to impeachment proceedings continued to flow, gold spot prices would shift sideways along that level through the rest of the session. More buyers in search of safe haven stepped into the market during the UK’s Wednesday trading, as Prime Minister Boris Johnson’s remarks at the Conservatives’ annual conference indicated he is committed to his hardline promise of delivering deal or no-deal Brexit at all costs, even with less than a month remaining before the deadline. With that lift, US-based traders came online for Tuesday to see gold prices hanging just below $1490 and maybe contemplating a run back to $1500/oz.

Disappointing Private Payroll Data Gives Gold Another Lift

Wednesday morning would bring gold’s first attempt to retake and retain the major psychological level at $1500. With analysts and investors still rattled by Tuesday’s manufacturing data, confidence would take another hit with the release of disappointing ADP data on private payroll numbers. The number of jobs added in September, 135k, was below expectation but only marginally so—it was the subtraction of 40,000 jobs from revising August’s data that really spooked the markets. Equities and the US Dollar would have another ugly day, and gold prices would rise to $1495/oz.

Investor’s growing concern that a recession is inching closer despite recent Fed policy as well as another day of troubling headlines would keep the fear trade alive through Wednesday, and in the early afternoon the yellow metal would trade above $1500 for the first time this week while silver spot prices surpassed $17.50 once again. While silver managed to set up lasting support, gold prices were unable to hold $1500 but did manage to hang on to $1499/oz throughout the trading day and into the start of the European Thursday trading session.

Gold Prices Regain $1500/oz After More Concerning Growth Data

With the UK’s Prime Minister’s new Brexit deal proposal to the EU appearing to please no one, London- and Frankfurt-based trading was choppy on Thursday morning but the more risk-averse mood gave gold prices the lift above $1500 that it would, for the most part, hold through this afternoon’s close of business. 

Thursday’s macroeconomic data would ultimately cement gold’s return to $1500, but also dampen its efforts to run higher. The key release, in terms of chart-impact, was the disappointing tick lower in non-manufacturing PMI (expectations were for a survey number more or less flat to Augusts.) While the important index of the services industry-- which is the modern heartbeat of the US economy—remains in an expansionary range, the market reaction to what in other months might simply be viewed as a mild disappointment was clearly exacerbated by the manufacturing sector’s poor showing on Tuesday and gold priced ripped as high as $1515/oz on the news.

Gold spot prices would fail to hold that high point, drifting to $1505 by the end of the day, and I think that was driven by some more rational analysis of the weekly data on initial jobless claims that was released early in the morning. In my view, as I touched on in Monday’s preview, barring a massive breakdown in PMI data for both sectors (and I mean something much worse than what we got on either Tuesday or Thursday) I don’t think that markets can reasonably expect a further dovish shift from the Fed without deterioration in their primary charges: inflation and the labor market. With that in mind, I think that on Thursday we saw the gold market to some extent digest jobless claims data that it slightly elevated on a monthly scale but still scrapping the belly of a five-year chart. Even with an unexpected drop in ADP, it’s difficult to look at that kind of trend and expect a Jobs Report that would shake the FOMC into taking further action. I think it was a version of this thought process by large-sized investors that saw equities finally have a green day and gold prices fall off a bit from the highs on Thursday, given that concerns about unrest in Hong Kong and political instability in Washington were still present.

Gold’s Strong Week Moderated by Solid Jobs Report

The turmoil in Hong Kong deteriorated further Thursday night, and the risk-off impulse pushed gold prices slightly higher again, but it would be short-lived. Non-farm payrolls showed 10k fewer jobs added for September than expected but, in a reversal of Wednesday’s ADP data, the previous month’s number was revised considerably higher; also, somehow, the headline unemployment rate managed to drop even farther to a 50-year low. (Five-oh. Not a typo.)

Unsurprisingly, the news sent the US Dollar rallying higher along with stocks, and gold prices were slammed lower; the yellow metal’s spot price even managed to fall below $1500 again albeit very briefly. Over the remainder of Friday’s trading we’ve seen gold rebound back to the $1505/oz range because, let’s be honest, all that other bad news isn’t going away.

Next Up

Next week, we’ve got some big data points that will go a long way to setting gold’s trading trend through the end of 2019. First, and foremost, we’ll get FOMC minutes on Wednesday afternoon followed by an updated view of consumer inflation on Thursday. And, hey, maybe we’ll get another crack at solving this US-China trade war; I don’t think you’ll be surprised to hear me say that I’m not optimistic.

Don’t let that worry you though, traders. Just like every Friday, your top priority should be to get away from the screens and enjoy your weekend. I’ll see you all back here on Monday!