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 are paying the tab for some surprisingly positive US economic data this week that has led to a ripping rally for the US Dollar.

Although the yellow metal has suffered some sharp losses in the back-half of this week, there does seem to be consolidation and support at the current levels.

So, what kind of week has it been?

By the end of this month—next week, really—what will stand out as important and useful information from this week will be a few points of economic data release for the US. But gold prices also made some pretty sharp moves over the last five days, so let’s touch on that first before we get into the macro numbers.

After stabilizing just below resistance on Monday, market reaction to Tuesday morning’s CPI data (which we’ll cover below) pushed gold’s spot value back above $1800/oz for the first time in a week. The yellow metal’s momentum plateaued during the first hours of US markets, but it appeared to be consolidating for a positive week ahead.

That outlook was short-lived, as we know now. Unexpectedly strong manufacturing and industrial production numbers drove investor risk appetite higher, towards equities but away from less exciting safe-havens like gold. Spot prices slid back on most of Tuesday’s gains as a result, and dropped back below $1800.

The US Dollar began strengthening on Wednesday night, likely boosted (among other influences) by increasing concerns about instability in China spreading into other Asian markets. This trend put notable pressure gold prices. As US traders logged on for Thursday, the rolling start for Dollar’s bull run kicked into a full sprint with the release of August’s Retail Sales report, which far surpassed slightly muted expectations.

• Having already fallen into negative territory for the week as the Greenback strengthened and Treasury yields rose through the European morning, the positive, risk-on US economic data coincided with gold spot falling through an air pocket before US cash market opened and the slide leveled out at a four-week low.
• Buyers appear willing to step in and keep gold prices supported at $1750/oz for now, and that level has held through a less volatile Friday.

We have seen some movement on Friday to close the week—a moderate rally for gold slid back in the morning as bond yield’s surged again, pulling the benchmark 10-year to highs around 1.375%-- but it’s difficult to assign any specific drivers to these moves and Friday is a “quadruple witching” for options expiry, and that always creates some wonky price action in major assets.

So, let’s go over the meaningful economic data we saw this week.

August’s CPI report continued on the prior month’s trend, showing that consumer price inflation from one month to the next is continuing to slow, and by more than expected. Core inflation, month-over-month, rose only 0.1% (where expectations were for a pace of +0.3%) while overall inflation was slower as well.

• Some of the clear drivers of spring’s post-vaccine inflation surge have now began pulling back, with used cars and, hotel rates, and airfare’s components all retracting in August.
• This is a step in the right direction for confirming the stance of the Fed and the “this inflation is transitory” camp, but is not yet incontrovertible proof. It further relieves some pressure on the Fed to tighten policy in the near-term, and while it shouldn’t merit a change to the FOMC’s statement next week it will likely get some commentary from Chairman Powell in his post-meeting Q&A.

Following healthy Industrial Production data and a strong beat from the New York Fed’s manufacturing survey on Wednesday, investors were further relieved by reporting that US retail activity actually improved for the month of August.

• Retail Sales rose by 0.7% over the course of the month, whereas some concerning recent reads on consumer sentiment and the unavoidable proof of the delta variant’s surge had economists bracing for a contraction of roughly the same size.
• We’ve already covered how the strong data impacted gold prices. The overall market reaction appears to be in context of the US economy vs. China’s (also consumption-focuses) economy this week. To see signs of US recovery strength while China’s growth looks uncertain at best seems to have driven investors quickly in to US Dollar positions.
  
  • This has not only hampered gold’s path, but also put a cap on US equities to end the week.

Looking ahead to next week, our attentional will be weighted towards the middle of the week again, with the September FOMC meeting topping the schedule. There are low expectations for any meaningful announcements, but markets will be paying close attention to Chairman Powell’s commentary on this week’s inflation data and other recent inputs.

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.