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 rallied strongly over the final two trading days of the week, and may in fact pare a respectable amount of the losses endured at the start of the week following Joe Biden’s electoral victory in the US presidential election, and reports of a well-performing coronavirus vaccine candidate.

While gold and silver’s charts have been more of a steady climb since Tuesday, a majority of market attention has been focused on more volatile rotations and shifts in global equity markets and US Treasuries. The core narrative drivers however, are the same as just prior to Election Day: the US economy’s desperate need (and total lack of) fiscal support from Congress to battle the effects of the spring’s Covid-19 surges; and another round of contagion picking up pace in the US each day.

So, what kind of week has it been?

Gold Prices Have Made a Relatively Impressive Recovery as Early Week Optimism Fades

The aggressive sell-off in precious metals (and other non-Dollar safe havens) on Monday morning left a big stamp not only on that single day’s trading but also the overall pace and positioning of the markets around major assets for the week. Investors and managers appeared happy to step into “cheap” gold positions around Monday’s lows and the yellow metal got saw some price recovery to $1880/oz and consolidation in Tuesday’s trading. Silver spot prices generally moved in step with gold.

Relative to Monday’s fireworks, metals prices had traded mildly through most the week until Thursday evening; Other key correlated markets were drawing participants’ attention. For the start of the week, it seemed like the only top-tier safe haven asset seeing bigger outflows than gold was US Treasury debt: the yield on the US 10-year note continued moving steadily higher above 0.95% on Tuesday and threatened a run at 1%. This likely created a feedback loop that was weighing on gold prices, as Monday’s surge in risk appetite send yields higher, and on Tuesday just the sight of rising yields would have encouraged even more risk-taking by investors, and so on. We also saw some unusual moves in equity markets, as (seemingly) brief rotations regarding which sectors investors wanted to weigh into pushed the Dow Jones Industrial benchmark for US stocks higher while the more technology-focused S&P and NASDAQ indices fell. Of course, lower prices in the hot-running tech sector were never going to stay lower for long, and we saw the reverse trade on Wednesday. These we negative midweek conditions for gold prices, which fell to once again challenge Monday’s lows near $1860/oz.

There’s no way to know whether the bond market would’ve taken the important step through 1.0% yields on the benchmark 10-year note had there not been a forced pause in momentum. As it happened, the US’ Veterans Day holiday saw debt markets go dark for a day just at yields were approaching that threshold and, with the market’s risk appetite fading at roughly the same pace as new daily records of Covid-19 cases were being made nationwide, the Wednesday evening resumption of trading in the bond market saw money managers rushing back into the safety of US government debt.

Quite a ride pic.twitter.com/PiAxHJnqv5

— Francine Lacqua (@flacqua) November 13, 2020

The reversal of market moods deepened through Wednesday evening and Thursday’s global trading, as both precious metals and US Treasuries saw steady gains throughout; meanwhile, equities weakened in most major economies and the US Dollar seemed unable to generate its own momentum or appeal to investors seeking insulation from risk.

As we wrap up the week, although the US stock market is (at the time of writing, Friday morning) recovering from Thursday’s loses and Treasuries are seeing a new round of selling, gold spot price has made some of its sharpest gains of the week: Mid-day action on Friday sees the yellow metal trading and consolidating at $1890/oz. Because it’s virtually impossible to imagine market’s next week receiving a risk-on signal as strong as what we saw on Monday, if gold prices can get a toehold this close to the major line of $1900/oz before close of business, that bodes well for a more positive chart next week.

Consumer Inflation Data Suggests the US Economy May Have Less Runway than Expected

This week’s data calendar was sparse, to say the least, and its immediate impact on gold and Dollar trading patterns was appropriately light. The main turn of the week was Thursday morning, which brought us the weekly update on new jobless claims as well as October’s consumer inflation data. Th pair presented two contrasting signals.

While Initial Jobless Claims not only improved but beat expectations, consumer prices grew slightly less than anticipated in October, according to both the “headline” data and the less-volatile core numbers.

JUST IN: A measure of U.S. inflation was unchanged in October, missing forecasts that called for a modest gain, reflecting cheaper gasoline, declining medical-care costs and lower clothing prices https://t.co/EtxAaI41cu

— Bloomberg Economics (@economics) November 12, 2020

This is particularly worrying as we know that October’s data sets will reflect the very last lingering effects of the spring and summer’s government support and stimulus packages; If both consumer spending and business’ hiring—both influence price inflation—were already pulling back in October, the US economy looks to be entering some rocky waters as consumers await another round of fiscal stimulus.

Looking at market movement on Thursday, it seems that sentiment was more damaged by the outlook suggested by the CPI data than it was lifted by improved weekly labor data as safe haven assets like gold began their Thursday/Friday climb higher shortly after the US economic data hit the wires.

Central Bank and CDC Warnings Have Kept Markets Cautious

The rapidly growing need for that fiscal stimulus, which must be enacted by a so far fully inept—and now, lame duck-- Congress, remained at the core of commentary from not only Fed Chairman Jerome Powell and a handful of other influential FOMC member, but also the heads of Europe’s core central banks. That these warnings continue apace at a time when it’s harder to see the clear path to such a rescue package and the (also lame duck) Trump administration is seen to be actively cowering away from any responsibility for the effort, is a deeply worrying indication of the how the US economy may be performing at the turn of the year. With next week’s economic calendar heavily-weighted to Fed officials’ public appearances, this is likely to remain the going macroeconomic concern that markets will pivot around.

Of course, the coronavirus that has impacted every corner of life inside and outside of the markets in 2020 is doing the perfect opposite of “going way.” With major European centers, the US as a whole, and important metro areas within the States in particular seeing new record highs in infection number almost daily, the “what next?” of America and the globes second effort at containing a pandemic will also be a key narrative driver in the gold market next week.

With these factors likely to keep risk-aversion present to a growing degree in the markets, like I mentioned before, if gold prices can consolidate near resistance ahead of next week, there is potential for momentum to be created.

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.