GoldPrice.

Happy Friday, traders! Welcome to your recap of the week in metals and currency markets.

We’ve had a whippy final day of trading to cap of a wild week, and at the time of writing all that as shaken-out to a pull-back week for gold with spot prices trading just above $1505/oz to end the day.

So, what kind of week has it been?

The Price of Gold Ends the Week Lower After Being Whipsawed by Jobs Data, Powell

To start with today: we’ve seen an awful lot of trading for a Friday that looks like it will net-out as flat from a pricing perspective. This is thanks to our two offsetting drivers of risk sentiment: the August jobs report and Federal Reserve Chairman Jerome Powell’s final comments ahead of the next FOMC meeting (or, rather, the market’s reaction to the comments.)

With prices languishing at $1505/oz (spot) this morning, having been hammered lower by Thursday’s great resurgence of risk-appetite around the globe, gold received a final jolt for the week with August’s count of Non-Farm jobs added disappointing expectations and re-raising concerns about how much stress the US-China trade war might be putting on the American economy. Our full recap of the release is here. I have to say it’s curious to see such an aggressive flight from risk as a result of a number that was certainly a miss but not an awful one, as gold prices immediately climbed back above $1520/oz.

Spot prices for the yellow metal ran out of steam before mounting a real run at. $1530, and looked to settle for the morning in the low 20s. They have been sent straight back down to that $1505 level however, by the FOMC Chairman’s comments and Q&A delivered to an audience in Switzerland in which he seemed to indicate the committee is leaning hard toward another quarter-point rate cut in September, but also that there was little appetite among the members for anything more aggressive than that.

Demographics time - millennial men are not killing it when it comes to employment-population ratio. Continuing that long-running narrative. pic.twitter.com/JsrybuhHSA

— Jeanna Smialek (@jeannasmialek) July 5, 2019

It’s another confusing reaction in the gold market from my point of view: selling like this in the face of implicit confirmation of an interest rate cut. My best guess for now is this: as the gold market was starting to settle in for a moderate correction at $1505, the (relatively) poor NFP numbers spooked investors about the immediate health of the economy (sell risk!! gold to $1525!!); but then Chairman Powell quickly calmed those fears in saying that the Fed is not concerned about a recession in 2019 at this point (buy risk!! gold back to $1505!!)

I’ll be mulling over today’s movements this weekend to develop some more useful ideas about it, but for now let’s take a look at how we got to these lower prices in the first place.

Gold Prices Rose Again on Tuesday, Spurred by Weak Manufacturing Data

The biggest part of Tuesday’s action came down the pipe just as I was finalizing our weekly outlook piece, with the US’ manufacturing PMI falling into contractionary territory unexpectedly. It’s the first time that’s happened in three years, and the risk-off impulse was enough to spur a hard drop in the US Dollar and roughly $10 worth of gains for gold’s spot price.

Wall St hit by trade woes, manufacturing contraction https://t.co/KbhvxGmedM

— fastFT (@fastFT) September 3, 2019

Despite giving my own fair share of words to discussing the importance of manufacturing PMI to US macroeconomics and to gold trading more specifically, I was honestly surprised by how much coverage the data received throughout the day; the risk aversion that persisted throughout the rest of the trading session did its part to support spot prices for gold around $1547/oz and would help the yellow metal strike a six-year high closing price.

Tuesday also proved to be a busy day for important, if not always market-moving, headlines globally and at home. Stateside, St Louis Fed President James Bullard in an interview Tuesday morning called for the FOMC to cut short-term rates by 0.50% this month, in order to combat the “global shock” threatened by the US-China trade war. Meanwhile, from the other side of the fence, Boston Fed President Eric Rosengren argued that the American consumer is still offering sufficient support to the economy and so no further rate cuts are needed at this time. Neither statement caught observers by surprise, given Bullard and Rosengren’s respective track records.

The news flow from abroad on Monday evening was a mixed bag as well. On the side of instability was UK Prime Minister (for now) Boris Johnson suffering an ugly loss in his first parliamentary vote, and an important one.

BREAKING: Britain's Parliament is now a step closer to blocking a no-deal Brexit after rebels won a key vote against Boris Johnson's government https://t.co/PCiPxvwskq https://t.co/jJnLyd2WYG

— Bloomberg (@business) September 3, 2019

The defeat, the complete collapse of the Conservative Party’s slim parliamentary majority, and Johnson’s promise (threat?) to call for new general elections in Britain certainly set the table for an interesting week across the pond.

Gold prices began weakening with the opening of Asian markets Tuesday night, and the selling accelerated alongside the initial return of risk appetite as Asian equities and fans of human rights in general celebrated the announced withdrawal of the controversial extradition bill that had been the catalyst for months of protests in Hong Kong.

On a Slow News Day, Gold Prices Rise to Six-Year Highs; Silver to Three-Year Highs

Gold’s weakness would persist through the European trading session, but the brief trend was reversed at $1535/oz as US-based traders came online around 7:30am EDT and began bidding the yellow metal’s price back up. Without a great. Deal of major headlines or economic data on the docket to begin the New York session, I think it’s reasonable to assume the morning rebound to Tuesday’s highs was a textbook example of markets “buying the dip” in gold. The move set a solid platform for prices heading into the afternoon; from here, the day’s round of FedSpeak would provide further fuel for gold’s rise as New York Fed President John Williams, certainly the most prominent of Wednesday’s speakers, split the space between his colleagues Bullard and Rosengren the day prior by reaffirming the party line that the FOMC will “act as appropriate.” This was seen as (at the very least) further confirmation of some cut at the September meeting and, given the upshot of gold prices to $1555/oz and (another) six-year high, a hint that global trade concerns might even push the Fed to cut by 0.5% this time.

Federal Reserve Bank of New York President John Williams says uncertainty is weighing on central bank decision-making at the moment https://t.co/oBQc55hGbz

— Bloomberg Economics (@economics) September 4, 2019

The global commodity session for Wednesday closed with precious metals at those lofty levels: gold spot price holding north of $1550 and silver trading at a stratospheric $19.50/oz. Wrapping up the day, it almost seemed like the metals were setting the staging ground for their next move higher.

Gold Prices Driven Lower as Plans for New US-China Talks Drive Risk-Appetite

That would of course prove to be a faulty assumption as what looked to only be a repeat of Tuesday night’s mild selling picked up steam around the start of European trading. Risk appetite was waking up for the week, brought on by whispers first and then confirmation from the Chinese government that a new round of face-to-face negotiations with the US trade delegation were being planned for a date in early October. This objectively more concrete news to trade on than any claims coming out of the White House this summer, primarily because both sides have confirmed it to be true. There’s a lot to unpack about it—not least that as of today a new round of US tariffs on Chinese goods is set to go into effect on October 1—but risk markets were clearly ready to bite hard on this news. As I said, there was some light selling in the European session initially, and gold was driven back below $1540/oz in the early US hours when the August ADP data outperformed expectations.

The floodgates opened alongside the US equites market, with traders swarming into risk-on positions and selling-off the safe havens assets like gold; within half an hour the selling deepened with the release of service sector PMI which was also better than expected, showing more cracks of light through the recent gloomy assessments of the US economy. When the dust settled by lunchtime, the gold spot market had leveled-off below $1520 while silver prices are back below $19/oz. Trading in metals and many other assets remained mostly flat through the remainder of the session. The Asian and particularly the European markets took off running with the risk-on baton during their Friday trading and it’s from that mix of risk-seeking and profit-taking that we arrived around this $1505 level from which we began and seem to be ending Friday’s session.

Next Up

More short-term gold longs are probably fretting as we head into next week, but I think both fundamental and technical views of the metals market suggest there’s room to rebound at least somewhat: fundamentally speaking, I’d hesitate to call for lower gold prices ahead of expected rate cuts from both the Fed and the ECB in coming weeks; while the technical charts suggest that to truly “break” the summer’s uptrend lines, gold prices would need to sink below the $1500 level and silver would need to fall as far as $17.50/oz.

Keep two things in mind of course: 1.) this is not investing advice, and 2.) we genuinely can’t predict the next market-moving headline to come out of Washington.

With that said, as we move into next week, we’ll be keeping an eye on our major macroeconomic headlines (namely, US-China trade talks and Brexit,) while also trading around that presumptive ECB easing on Thursday and the final update on US inflation ahead of the next FOMC meeting.

So, enjoy your weekend, traders; I’ll see you all back here on Monday for a look at the new week ahead.