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 prices have not only climbed up from a setback at the end of the prior week, but endured a pair of sharp drops late this week in a path that appears to culminate in consolidation for the yellow metal back above the key support line of $1800/oz.

So, what kind of week has it been?

It definitely is not what we would’ve expected to say in the wake of a very large upside surprise from Friday morning’s NFP number, but: This week is ending with positive signals for gold’s price chart.

Even with a brief look at the gold’s chart for this week’s spot prices, we can see two major drops in on Thursday and Friday; These were part of the markets’ initial reaction to a rapid rise in Treasury yields, and to Friday morning’s strong NFP numbers, respectively. What’s a positive signal for the yellow metal is that both to these fast falls below $1800/oz were followed it quite short order by a rebound and rally. Spot prices, at the time of writing on Friday morning, have not regained the overnight highs of $1814, but overall, it appears that we’re wrapping up a productive week for gold as the precious metal consolidates in its return to a major level of support.

The likely explanations for gold’s rebound on Thursday feel a bit vague—especially compared to Friday’s moves, but it’s reasonable to say that prices benefited from a combination of strong underlying support (buyers eager to step into gold below $1800/oz,) and investor risk aversion (gold’s rally got started in earnest once US stock markets opened with a drop, following markets’ nauseated reaction to Meta’s quarterly reporting on Wednesday afternoon.)

Friday’s deep drop and ensuing resurgence, on the other hand appears to be a more tangible example of investors absorbing and processing a major data point: the January Jobs Report.

January’s NFP number—effectively, the number of non-farm jobs added to the US economy for the month—ripped past expectations for a meek increase of 150k and reported a surprising gain of 467,000. Not only that, but the prior two months were revised higher by a combined total of more than 700K.

BOOOM. Jobs report crushes expectations.

467K new jobs in January vs. expectatiosn of 125K. So much for the big Omicron jump.

The unemployment rate rose to 4%, however, this is in the context of a big LFPR jump.

Also HUGE upward revision to last month.

— Joe Weisenthal (@TheStalwart) February 4, 2022

As we touched on in Monday’s preview, there was some question about whether the usual weak NFP numbers that we expect to see each January, coming on the tail of two major disappointments in November and December, might give the Fed any kind of pause ahead of initiating their rate-hiking cycle in March. It would safe to say that Friday’s door-buster of a report turned over that particular table:

Big jump in 2-year yields.

March hike more than locked in, it would seem. https://t.co/FLmrQJvK8K pic.twitter.com/qA9ll34hv7

— Joe Weisenthal (@TheStalwart) February 4, 2022

It wasn’t surprising, then, to see gold plummet on the initial release. As prices for US Treasury issuance also fell alongside it (pushing the 10-year yield above 1.9%,) the yellow metal again dropped through support before eventually marking a low-tick around $1792.

Roughly 30 minutes ahead of Friday’s US market open, gold began rallying fast, even as Treasury yields were not pulling back aggressively from the new highs, nor was the US Dollar. What it appears that investors and money managers were sorting out, following the knee-jerk reaction to the Jobs Report, is that this suddenly brighter picture of the US labor market just neatly fits into the Fed’s plans for tightening monetary policy in 2022; It isn’t enough to compel an acceleration. If the market previously felt that gold was fairly-priced around $1805 ahead of March’s rate hike and the Fed’s projected policy path for 2022, then why wouldn’t managers step in to buy the post-NFP dip?

That view, which we think came into play post-NFP, and the Friday morning drop and rally in general, certainly leaves room for profit taking trades at the end of the session to knock gold back a few paces; But this does appear to be another constructive rebound for the yellow metal. The other side of that coin, of course, is that a third drop of $15/oz or more for gold in short succession risks a major break of support. We’ll be looking out for that kind of unexpected shock next week, with an eye in particular on new inflation numbers due on Wednesday.

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.