GoldPrice.

Happy Friday, traders. Welcome to our weekly market wrap, this time covering what has been a holiday-shortened trading week for most markets. As always, we’ll focus on the economic data and headlines impacting gold prices, as well as the US Dollar and other correlated assets.

Gold prices have closed just below 7.5-year highs and silver spot prices have risen back above $15/oz to end a week dominated by another rescue package from the Fed.

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Even prior to the Thursday announcement from the FOMC, an environment of cautious optimism around global efforts to combat the coronavirus pandemic and some hopeful developments in the oil market had created a very supportive environment for gold investment that has allowed the yellow metal to trade with strong support.

So, what kind of week has it been?

Monday

Gold prices made a strong and steady ascent throughout Monday’s trading session. When our weekly preview piece went up, the yellow metal was going strong at $1650/oz and would continue higher in the afternoon. Later in the evening the gold market navigated some volatility that included brief forays near the end-of-week highs, but spot prices would ultimately settle along $1660 through Asian markets’ Tuesday session.

The newsflow on Monday was light but tipped towards to the positives. Financial markets seemed most focused on a run of numbers, observed and reported, suggesting Covid-19 fatalities (and, in come places, infections) may be starting to level-out in major hot spots like New York City and part of Europe. Benchmark equity indices were in the green in all developed markets, while the Dollar Index and even Treasury yields moved higher as well.

Still, the markets seemed to appreciate that any optimism still needs to be tempered with caution and this attitude helped to create a supportive environment for gold to rise both on Monday and throughout the week. Monday also saw hopeful reports of Russia and the Saudis nearing a deal that would end their bellicose efforts to flood an already over-supplied market; the morning’s rally in crude oil prices also lifted gold higher along with the broad commodities complex even as oil eventually fell later in the day.

Tuesday

Tuesday was another slow news day, but this time tipped just slightly to the darker side of things. Of key concern to US investors was a sharp jump in deaths caused by the coronavirus in New York and New Jersey on Tuesday, thankfully tempered by New York marking three straight days of a downward trend in new cases. Gold prices weakened ahead of the US session as profit-taking trades were made in the futures market, but the moderate uptick in risk-aversion from Tuesday’s headlines helped support gold through safe haven demand and the metal closed it’s Tuesday book of business at a steady level of $1650/oz while silver spot prices had briefly crossed above $15/oz.

US stocks traded higher through most of the day on Tuesday but saw a strong burst of selling in the afternoon alongside a falling Dollar and ended the day at a loss while oil prices gave back gains as well. Selling in Treasuries continued to push the benchmark 10-year note’s yield higher.

Wednesday

Some mild volatility rolled through gold prices in the overnight sessions, but as trading spun up for the US’ Wednesday session the yellow metal’s range was pretty tightly locked between $1645-55/oz with prices holding closer to the lower end. The majority of Wednesday’s action was covered in our recap of the FOMC minutes release. While you can find more specifics there; the short version: gold (and other assets’) prices were unmoved by the as-expected release from the FOMC but did rally mid-afternoon alongside a rush higher in oil prices and the Dow.

Stocks hit session highs as oil surges more than 6% on renewed hopes for production cuts https://t.co/MxS6MygwGc pic.twitter.com/HUVdrjmtqc

— CNBC Now (@CNBCnow) April 8, 2020

Gold’s rally over-extended itself a bit to force a correction, and spot prices closed the day lower—but supported—around $1645. US stocks meanwhile continued to rise on hope of quickening recovery for the US economy and the energy sector in particular. The S&P 500 closed the day up nearly 3.5% and, from a technical standpoint at least, crossed back into bull territory from March lows.

Thursday/Friday

Thursday capped the trading week with a big gain for gold prices which notched a seven-year high point. The yellow metal began rallying through the European trading session in a steady march similar to Monday’s although steeper. Gold spot prices ran near to $1665 ahead of US economic data, likely driven in part by end-of-week positioning from London and Europe-based trade desks. (In observance of Easter Monday, most European markets will be closed until Tuesday, so this was many investor/manager’s last chance to position ahead of a long weekend.)

While gold’s big leg up to wrap the week began at the same time as it was announced that the number of new unemployment claims for the week once again totaled more than 6.5 million Americans, it seems to be general consensus that is was the Fed that provided the real motivation for gold buying:

Gold jumps to seven-year high as Fed unleashes new emergency aidhttps://t.co/IPFIzQUnMK via @business pic.twitter.com/Cc4YnExXTl

— Yahoo Finance (@YahooFinance) April 9, 2020

While the Fed’s meeting minutes released on Wednesday did little to inspire markets, Jerome Powell & Co.’s announcement of yet another immense support package—this one promising more than $2 Trillion in support for state and municipal governments as well as mid-sized private businesses, and some application of the Fed’s asset purchases to the junk bond market—dominated the trading day on Thursday.

The actions announced by the Fed are supportive for gold buying in two important ways. First, they solidify expectations that interest rates across the financial system (including some corporate junk debt, now) will remain low for longer, increasing the attractiveness of non-yielding gold as a protective investment. Secondly, and for now more theoretically, they pump up the inflationary pressures in the US economy and make it possible that we could see a long-awaited burst of inflation once the American business cycle returns to some version of normal operations; investors and managers may well be hedging against higher future inflation by buying gold in the present. However these buy signals are balanced, gold spot prices briefly touched 2013 highs just below $1690/oz before closing the sessions (and the week) above $1680. Silver prices benefited as well, solidifying a position above $15/oz.

With much of the market and most of the traders already dark for the Easter holiday weekend, the lone point of coverage for Friday has been the release of March’s consumer inflation data. Headline CPI fell well below 2%, mostly thanks to the collapse in energy prices, while the drop in core inflation was more mild. The numbers are concerning, but to be expected given the current economic drag.

Here are the last 12 core CPI prints. This chart is gonna look kinda wacky for a while. pic.twitter.com/CHw6ytCAF1

— Michael Ashton (@inflation_guy) April 10, 2020

Next Up

Heading towards next week, we’ll need to be prepared for some level of volatility around the global market re-open when investors and institutions get their first viable opportunity to trade today’s news and numbers, as is typical for gold coming back from a bank/market holiday. Top of mind will be the reaction in the commodities class (driven by crude prices) to this afternoon’s reports that the OPEC/Russia/Mexico standoff has found a resolution and agreement to cut production. On Sunday and Monday, we’ll also see the market’s reaction to any developments around Covid-19 containment efforts over the weekend. Economic data next week is fairly light, and so these narratives—the global efforts to combat the viral pandemic and shifting supply/demand reactions in the energy market—will likely play the biggest role in gold’s immediate path.

Until then, relax and enjoy whichever long weekend you’ve got, traders. I’ll everyone back here next for our preview of the next trading days.