GoldPrice.

Happy Friday, traders. Welcome to our market wrap for the week, where we focus on the economic data, news flow, and market narratives that had the biggest impact on gold prices over the last five trading days and may continue to in future.

Gold prices have, at the time of writing, just moved into the green for the week, as a strong bull rally for the yellow metal has capped a five-day rebound from the spate of selling that pushed gold prices lower to start the week.

So, what kind of week has it been?

Monday: Gold Recovery Began Almost Immediately, and Continued Even as the Fed Rescued Stock Markets’ Monday

At the start of Monday’s preview piece, I talked about how gold prices had fallen hard through the European morning and into the start of US trading as last week’s environment—one that saw gold benefit as the dominant safe haven asset while the Dollar’s rule faltered—appeared to have reverted to one of Dollar dominance that put pressure on gold prices, or at the very least capped the yellow metal’s upside.

It took roughly another 30 minutes for that coverage to become outdated.

The market (and most conscious parts of the globe with access to a free press) began the week gripped by worry that the coronavirus is making a pandemic resurgence as many parts of the US and developed nations attempt to reopen their economies. In this mood, US stock markets opened Monday’s cash trading by falling off a cliff just as the key indices in Asia and Europe had done. The move coincided with a sharp reversal in the Dollar’s overnight rise, and gold prices rallied in response with spot crossing back above $1720/oz before lunch.

Mid-afternoon, the Federal Reserve announced it would be following through on plans to start including corporate bonds in its asset purchasing program. Gold prices jumped on the move, closing in on $1730 spot; it’s starting to seem as if gold markets will take any accommodative action from the Fed as cementing guarantees that ultra-low rates will remain over the horizon, even when rate policy isn’t explicitly mentioned. At the same time, US stock rallied hard on the news as investors celebrated the sense of further assurance that the Fed will continue to step in to support (some might say ‘protect’) the market through the current crisis. The S&P’s rally was strong enough to lift the index from 2.5% in the hole for the day to close just shy of a 1% gain.

While the Fed’s announcement reversed the fortunes for the stock market, the Greenback continued to slide throughout the session against its main trading partners.

Tuesday: “Buy Everything” Mood Returned to the Markets on Promises That the Flood of Monetary and Fiscal Stimulus Will Continue

In the Tuesday trading session, markets’ focus was turned from the concerning rise in new Covid-19 cases to the continuous rush of fiscal stimulus from the leading governments of the developed world and monetary support policies from their central banks. Washington accelerated the swing to risk appetite during the overnight hours, as reports broke that the Trump Administration is mulling a $1 trillion infrastructure spend in the coming months. Asian markets made strong gains as US stock market futures ripped higher on the news.

U.S. stock futures love the $1 trillion infrastructure idea.https://t.co/Lf3IpXUWs9 pic.twitter.com/AzsomSkWef

— Tracy Alloway (@tracyalloway) June 16, 2020

Gold prices came under a bit of pressure, coming down from a stalled attempt to break resistance at $1730/oz, but managed to hold most of Monday’s rebound. The yellow metal saw another rise during European trading, certainly in part thanks to sudden news that North Korea had taken the provocative step of blowing up a joint station on their side of the DMZ. (As we’ve tensely awaited the next threat or salvo between the US and China over deteriorating trade relations I don’t think anyone had North Korea as their pick for driving commodity prices this week. But it remains the usual case that when something goes boom, gold prices go up.) Gold spot prices again topped out around $1730, underlining what would be the heaviest line of resistance up until the end of this trading week.

Gold and other non-Dollar safe havens came under a last bit of downward pressure during the US morning as equity investors cheered the shocking 17.7% growth in retail sales for the month of May, more than double the expected number. Gold (and its like) rebounded from the risk-on flash in pretty short order however; honestly, I just think investors are struggling to figure out how seriously to take these big spikes in May data and the recent uptick in coronavirus hospitalizations in the US is putting a cap on any data-driven exuberance and risk-taking.

Later in the morning, gold rallied back to the daily highs as Federal Reserve Chairman Powell began his semi-annual testimony before Congress. While acknowledging the day’s blockbuster retail growth data among other signs of improvement, the Chairman continued outlining the “significant uncertainty” surrounding a quick recovery in the US economy. His concerned tone gave a lift to the majority of safe havens—including the US Dollar this time—and gold saw an added lift from Powell’s (verbal as well as tacit) reaffirmation that rates will remain in the basement. The same signals of ongoing efforts from the Fed to support the markets that lifted gold once again to the $1730/oz range also drove a rise in equities, and the S&P 500 climbed nearly 2% by the end of the session.    

Wednesday: The Gold Chart Maintained Its Course While Equities Lost Momentum, As Fed Chair Powell Pushed for Continued Fiscal Support from Congress

There was very little in the way of key data points on Wednesday, so the markets continued to hold focus on commentary from Fed officials, particularly the second day of congressional testimony for Chairman Powell. The Chair continued on his track from the prior session for the most part, but also stepped up his insistence on the key role that the government’s fiscal stimulus has played—and, more importantly, needs to continue playing—alongside the Fed’s monetary stimulus in supporting the US economy through the current crisis. Powell also acknowledged (more than he had on Tuesday) the outperformance in May’s Retail Sales data, which he says “bodes well” for a strong recovery.

More of the same from Powell mean more of the same for the gold market. Spot prices, which had slid to mid-week lows following another failed pass at $1730/oz overnight would rally through the US morning thanks again to the Fed Chairman’s mix of warnings that dampened risk appetite and his continued implication that the ultra-low rate regime is here for a long stay. A volatile cash session in which the major US stock indices alternated between gains and losses (ultimately closing on the downside) also supported gold alongside other plays for safety. Following the morning climb, gold prices settled just below the resistance at $1730 and traded sideways from there across the afternoon and through the Asian Thursday sessions.

Thursday: Gold Prices Traded Flat as Coivd-19 Infection Rates Climbed Higher on an Calm Market Day

The gold chart repeated a familiar early-hours pattern on Thursday morning: a solid price rally to-and-through resistance (this time coinciding, as much as anything, with a massive  and unprecedented ECB liquidity operation) that ultimately lacked conviction beyond the initial move and so was followed shortly by downward pressure that rolled the yellow metal back to the $1720 range. As US traders logged on for the morning, gold and other risk-related assets were subject to some volatility around the morning’s data releases. While the week’s reports on initial and continuing jobless claims both were a letdown for optimistic observers, the Philly Fed’s update on regional manufacturing activity was another strong upside surprise. Gold spot prices experienced some choppy trading through mid-morning as markets, lacking much else to react to, seemed to struggle with the decision to follow either the risk-on or risk-off signals. By lunchtime, markets (including gold) began to lull and flatten out; in the search for market motivation, stocks were little help on Thursday:

Shaping up to be one of the three quietest days since *waves arms wildly* all started.

SPY range (high-low/yesterday closing price) is 90bps

— Luke Kawa (@LJKawa) June 18, 2020

Gold spot prices moved right alongside $1723/oz throughout the afternoon. Meanwhile, equities were mostly mixed with a slight edge higher, and the Dollar and US Treasuries saw more buying than gold on the day, as some investors began taking safer positions in the light of steadily rising infection rates across many US states that have lead the pack in re-opening their economies.

Friday: Gold Prices Have Unwound Sunday Night’s Losses as Rebounding Covid-19 Infection Rates Send Markets into Risk-Off Mode

Today has been another lacking in clear macroeconomic drivers for the gold market; although it does seem as though yesterday’s calm was more indicative of a consolidation, like a spring coiling before this morning’s rally which finally broke well above resistance at $1730/oz. From here, it appears that prices will close out the week on the front foot and near to (if not above) $1740/oz.

Strengthening that outlook is the recent development (at the time of writing) that US stock markets have turned negative following a fairly flat start to the day. The steadily climbing number of coronavirus infections and hospitalizations in the US has been putting pressure on the rose-tinted stock rally of recent weeks, and we’re now seeing real-world manifestations of this as Apple has become the first nationwide retailer to announce that it will re-close its retail stores in some states.

BREAKING: Apple will re-close some stores in Florida, South Carolina, and Arizona amid spikes in coronavirus cases. Dow, S&P 500 and Nasdaq are near session lows after this announcement. https://t.co/Ohc8ePYg24 pic.twitter.com/lJ1UUo2Tk3

— CNBC Now (@CNBCnow) June 19, 2020

If the down slope for equities persists, it seems unlikely that gold will see a heavy round of profit-taking this afternoon, allowing the yellow metal to close out the week with more upward momentum.

Next Up

Next week’s calendar is looking pretty sparse, for now. We can expect another busy week of public commentary for FOMC officials, but the biggest (scheduled) draw for markets won’t come until Friday as we get the most recent look at the Fed’s PCE measurement for inflation.

Until then, enjoy your weekend, traders. I’ll see everyone back here on Monday for our detailed preview of the next five trading days.