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.

After a see-saw week of trading, gold spot prices look set to end the week roughly in-line with where they started.

While the delta on gold’s immediate delivery value over the last five days is negligible, the week’s news flow and trading action have underlined just how closely risk appetites and safe-haven assets are tied to fiscal stimulus negotiations in the US. With that story still on going, it’s clear where our focus should be until either a deal gets done, or the clock crashes down to zero.

So, what kind of week has it been?

Gold Ripped Higher to Start the Week as Investors Settle into the Long Wait for a Vaccine Roll-Out in the US

When writing Monday’s weekly preview piece ahead of the US market open, I estimated that overnight market action and developing narratives might allow gold prices room to recover from the weakness of the past 10-14 days. That projection turned out to be a drastic understatement, as the open of cash trading in the US session saw key equity markets shudder and sink and investors flew to the protection of gold and other safe-havens: By lunch-time in New York, gold spot prices had surged to roughly $1865/oz, a $30 gain from the open, while silver reestablished support above $24.50/oz.

Slumping equity markets provided the counterweight to gold’s rise on Monday, with the S&P falling away from record highs; the major equity benchmarks in Europe and Asia followed suit. As we touched on in both last week’s wrap and this week’s preview, the cause of concern to start the week appears to be the no mans’ land we appear to be in with regards to how and when the coronavirus pandemic that has dictated the entirety of 2020 might come to an end. Practically speaking, in December we’re caught in a middle ground where markets have burned off the boost from Moderna and Pfizer’s announcements of successful vaccine development, but the actual delivery and implementation of a mass-vaccination plan (at least in the US) is still a few months away at best. As demonstrated this week, in this phase markets may be particularly sensitive to the stress from mounting COVID-19 infections and deaths, and the slow-or-no developments around a meaningful fiscal stimulus and support package for US consumers and the economy. For the time being, there is no real counter-balance—positive or otherwise-- to either narrative. And so, with deaths and infections reaching new records within the US and without, and no clear signals on Monday about how (or even if) stimulus talks were moving in Congress, investors and managers pulled away from risk, to the benefit of the yellow metal and the US Dollar.

Midweek Trading Action Highlighted How Closely Market’s Near-Term Outlook is Tied to A US Rescue Package

As if to make it that much easier for me find an outline this week’s wrap, Tuesday and Wednesday trading in these same markets served to underline our discussion of what the charts seem to be most sensitive to at the moment. Tuesday demonstrated just how easily news reports would be able to push markets around.

Towards the end of the day on Monday, reports re-circulated about US Senate leader Mitch McConnell prioritizing his demands above passing an already anemic relief package whose details were floated towards the end of last week. This darkening of hopes for key stimulus in the US, coupled with another day/night of surging COVID-19 infections and deaths, held Monday’s fearful tone in place, allowing gold prices to consolidate while Asian stock markets and those in Europe (which were experiencing their own kind of whipsaw from the UK government blundering through last minute trade deal negotiations) were rocky at best. Gold prices in fact took a brief $10 surge at the start of US trading, although the reach was short-lived and spot prices ultimate held steady around $1865 for much of the day.

Investors’ moods improved considerably later in the day however, with the dominant Stimulus and Vaccine narratives in the driver’s seat. In the back half of the US trading session, optimistic reporting helped US equities to rally to the tune of a new record high for the S&P and the longest running rally (10 consecutive sessions) for the NASDAQ. On one side, market sentiment was getting a boost by hints and reporting from Sen. McConnell’s side that he might be willing to give a bit of ground in an effort to progress stimulus talks; On the other, news circulated that the US FDA appeared likely to approve the Pfizer/BioNTech coronavirus vaccine protocol for emergency use, accelerating its delivery to the US public. After the US indices wrapped a strong Tuesday, the start of Wednesday’s book of business began with Asian and European markets celebrating the positive news as well and making their own gains and investors regained some appetite for risk. Gold prices managed to hold on to solid support around $1855/oz despite falling out of favor, but with the start of US trading for Wednesday selling pressure piled onto the precious metals and gold’s spot price fell as low was $1825 before finding buyers to step in. Investors were clearly feeling good about the way things were trending, particularly with regards to getting some form of relief or stimulus package included with the omnibus funding for the US government, with reports that the White House and the Treasury were again putting some weight behind seeing a deal made.

It’s still 2020 though, and nothing good can really stay for long. By midday on Wednesday, sentiment and momentum shifted hard into reverse as US stocks were directly hit by one of the worst days for market-leading tech stocks in recent memory. Meanwhile, the worrying realization (but, let’s be honest, not a surprising one) that the 24-hour blitz of reports and talk about progress in US stimulus negotiations was amounting only to…talk. Not only that, but the inability to pass even the performance of aid and relief for the American people was now threatening to ensnare the general funding of the Federal government. Having been forced back to reality, the S&P slid backwards for the day while the tech-focused NASDAQ sank by the most in a month.

Nasdaq ...not something you see often pic.twitter.com/MS4qXvokBA

—  (@chigrl) December 9, 2020

The commotion and concern brought more buyers back to gold, and the yellow metal put together a decent rebound-rally before consolidating at $1840/oz in the afternoon.

The Week Ends with Investors and Analysts Uncertain and Unsure

Markets were pretty clearly concerned about the US’ health, both literally and economically speaking, but Thursday’s trading seemed punctuated less by fear and a flight to safety, and more by uncertainty and general confusion about which blow or turn might be coming next. In equities this was expressed as a decidedly “mixed” day for the key benchmarks as the steady flow of headlines tested out just about every way possible to describe a “stimulus stalemate.”

Even if there was not mass migration to safety, gold managed to bring in consistent enough buyers to hold support at $1830/oz. The yellow metal (as well as US Treasury bills in favor of the Greenback) briefly swung higher as markets reared back from an ugly miss on this week’s Initial Jobless Claims.   

853,000

We just got the highest weekly jobless claims filed since the middle of September https://t.co/uALf8WeWyh pic.twitter.com/wcvPRDTriz

— Joe Weisenthal (@TheStalwart) December 10, 2020

Prices met pretty swift resistance at $1850 however, and the intraday rally was rejected. Once US stock markets opened for trading. Equities would go one to have an uneven, but not outright destructive session, but the already worsening estimation of the US labor market to begin December only added to investor angst about the week ahead.

At the time of writing on Friday, the unclear and uneasy mood of markets has persisted. US stocks are falling across the board, although not with a great amount of velocity, as investors remain primarily concerned about not only the vaporware that is the recently discussed “fiscal rescue package” but also the overall funding of the Federal government. The more acute concerns have been pushed back, for now, as the Senate on Friday passed a stop-gap funding bill to keep the lights on for another week. The market reaction to this has been to see stocks rally lightly (though not enough to erase the day’s loses, so far,) and a mild drop in gold and other safe-havens.

Next Up

While Congress’s one-week funding bill is preventing serious governmental and market dysfunction for today, it of course only kicks the can a bit down the road. I’m prepared for this to ensure that the same market movers—a push/pull between the race to package a stimulus bill with government operational funding, and the so-far unserious and unsuccessful “effort” to slow the damage that covid-19 is wreaking across the US until effective vaccination plans can be executed—will run the show next week, and, in terms of Congressional haggling, have a more dramatic impact on market sentiment. With another sparse economic calendar on the deck for next week, our attention will have to be rooted in the headlines.

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.