GoldPrice.

Happy holiday Friday, traders. Welcome to our appropriately brief recap of the week in the precious metals market. Gold prices are at a 7-week high in today’s very light trading, while silver looks poised for a possible move back above $18/oz; all in spite of a general risk-on mood in global markets that has seen the major US equity markets continue to reach new (if still uninspiring) highs.

So, what kind of week has it been?

An odd one, for a few reasons. Obviously it’s been a mostly unenergetic week with Christmas falling midweek, and very little to speak of on the macro data front; most of the Western world’s governments being on holiday has also kept the news flow very light. We’ve seen a continuation of the steady march higher in equities that was expected in this environment, given the strong 2019 that stocks have had.

And yet..

Gold firms up a foothold above $1,500 an ounce as investors positioned for 2020 https://t.co/0ZI2VzgOxT

— Bloomberg Economics (@economics) December 27, 2019

…gold prices have had one of their strongest weeks since this summer, gaining nearly $35/oz in the spot markets and looking likely to close Friday’s session near to $1515. The initial motivator—we saw a bit of it at the end of last week’s trading and then again on Monday—seemed to be optimism for a spike in demand in 2020 both for precious metals and the commodities complex as a whole. Indeed, we’ve seen oil prices also making multi week highs.

How tradeable this hopeful outlook for demand really is (both in terms of the demand actually coming to the market, and that demand’s ability to boost gold prices in the current environment for Fed rates,) is hard to bet on; even the analysts quoted in the link above describe gold’s movement higher this week as “mysterious.” What’s clear is that the yellow metal’s move to a major psychological level at $1500 as year’s end, even as (especially as) stocks and Treasury yields continue to rise, brought a rush of technical-based speculative buying into gold markets this week and pushed prices well past resistance and into the $1510-level.

Next week’s data calendar, news flow, and market depth will be similarly thin with the New Year holiday on Wednesday, but we may start to get an idea of how sustainable gold’s trend higher will be to begin 2020. Particularly in a lower-volume market, I suspect gold will have enough support at $1500 to hold until 2020 trading begins in earnest on January 6.

Macroeconomic Notes from this week:

• As we touched on briefly in Monday’s post, Durable Goods Orders for November were reported somewhat weaker than expectations, although markets took little time to react to the update.
• Tuesday’s Richmond Fed Manufacturing Index collapsed well below expectations, reporting a deeper (and second consecutive) contraction where analysts were expecting a rebound higher. Perhaps it may have been overlooked in a full-blooded marketplace but there was a certain level of fear-trading on the headlines that saw gold prices boosted higher. It’s not a major red flag, but yet another poor set of industrial data will put even more weight behind next week’s ISM Manufacturing PMI numbers.
• Initial Jobless Claims came in close to 225k, as expected. Markets will be keeping an eye on whether or not the longer-term trend starts to rise above that level.

Next Up

Another midweek bank holiday (and the continued absence, for the most part, of London and EU-based traders) will bring us another strange week of trading with mostly low liquidity, but the data calendar has a little more weight behind hit. I mentioned an important read on ISM data, which we’ll get on Friday morning, and that same afternoon will bring us an oddly placed release of December’s FOMC discussion minutes.

I’ll be back here on Monday for another truncated weekly preview. Until then, I hope you all have a pleasant weekend spent recovering from (or continuing on) your holiday celebrations. See you on Monday, traders!