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 experiencing a bit of choppy trading on Friday morning, but overall have made another run of promising gains despite the week being dominated again by a hawkish Fed.

So, what kind of week has it been?

Fed Chair Jerome Powell was the focus of market attention again on Monday; this time delivering public remarks that received a less than enthusiastic response from US equity investors, and sent a jolt through the markets that reverberated through the rest of the week and has certainly played a role in the gold price trajectory.

Powell Pulls Focus Again

The biggest takeaway from Powell’s speech is the continuing hawkish shift from the central bank and its chief. What was alluded to in the post-FOMC Q&A last week, and outlined in the anonymous “dot plot” and other components of the Staff Economic Projections from the Fed, was stated clearly by Powell Monday, saying that the Fed will “take the necessary steps” to combat decades-high inflation in the US economy and will move “expeditiously” to do so. That phrasing alone might have tipped investors off to an even more aggressive Fed stance, had Powell not just come out and said it: the FOMC is leaving the door wide open to rate hikes of greater than the standard +0.25% this year.

Powell’s comments led to an abrupt adjustment in the market’s projection of the Fed’s rate path this year—a 50-bp hike at the next FOMC meeting (in May) is now being more widely “priced-in” to Fed futures, and bets on a second XL hike immediately after are stacking up as well—which was followed by an equally sharp adjustment in equity markets; a negative one at that. And, although stocks’ immediate reaction was in line with what we would expect historically, gold prices benefited from another relief rally (as they had post-FOMC last week,) largely moving higher in Monday’s trading with the occasional dip-and-rebound. Again, a rally in gold price was unexpected here, but very likely was a result of one of gold’s most traditional roles for investing: that of a hedge against inflation. The top banker in the global economy spoke about the need for the Fed (now, at least) to aggressively and nimbly subdue inflation pressures, and that probably had the knock-on effect of getting more investors stressed about inflation. At least in the near term. Whatever the time horizon, the impulse led investors to lift gold prices to a $10+/oz gain on Monday, peaking above $1935.

Markets Have Seesawed From the Start of the Week

Whereas last week we saw a surprisingly positive take on Fed Day from US stocks there seemed to be little optimism or risk appetite after Powell on Monday. The Dow, S&P, and NASDAQ all slipped in the first session of the week, snapping a nascent run of positive returns. Moves in US Treasuries were more aggressive, of course, with yields climbing from the point that Powell stepped up to the mic: yields on the US 10-year note ran past 2.3% on Monday in a move that would continue through until Tuesday night, as global bond investors had their take on the Fed Chair’s remarks, and peak above 2.4%.

It seemed to be the high-rising Treasury rates that pulled gold prices lower on Tuesday, as they traditionally weaken in higher-yield environments, Overall, though, there was definitely a brief burst of optimism and risk-appetite that surprised a lot of observers on Tuesday, as investors bought the dip, particularly in US stocks, particularly in the tech sector which has been (relatively) battered for most of 2022. With rates higher and investors flowing farther into equity positions, gold slumped on Tuesday to a weekly low around $1912 (but again demonstrated reliable support well above $1900/oz.)

Gold Prices Rode a Gloomy Day to Positive Gains this Week

 As we’ve seen throughout March, the good feelings didn’t last. Fear and uncertainty returned to the markets on Wednesday in force, and from there set the tune for gold prices that has carried us into Friday’s session. Investors have a lot to be fearful and uncertain about, to be sure: the continuing war in Ukraine presents the largest and most unpredictable risk to markets (and investors’ own persons,) inflation will remain at a 40-year high at least until the Fed’s first moves against it take hold and, as of this week, the specter of a US yield curve inversion that many market participants (rightly or wrongly) believe to be a predictor of recession, is looming. With all that front of mind, it’s no wonder that US equity markets rolled back their gains midweek, the 10-year yield came off its top as more investors stepped into the safety of Treasury bonds and gold—the yellow metal rose steadily on Wednesday to close with a position just shy of $1950 (going on to move well above that level in Thursday’s trading.)

The gloom of Wednesday didn’t really manage to take hold of markets overall, just like the bounce in optimism the preceded it the day before. Markets have ultimately been more than a bit schizophrenic this week, when taking the 4+ days as a whole. The overall investor mood on Thursday seemed again more positive, with core US stocks again making gains even as gold prices and US Treasuries continued to climb.

Another Rate Rally for Gold to Endure This Week

As we lean in to Friday, at the time of writing US markets are getting off to an off one: the stock markets are subdued at the start (just as their Asian and European counterparts have been to close the week,) but Treasury yields are ripping out of the gate and Fed futures swaps now indicate that investors are expecting a policy path from the FOMC that implies two 50-bp hikes at some point in 2022.

The move has put gold prices under some pressure to begin the US cash session, but we’re again seeing some good support for the yellow metal (so far,) this time as high as $1945.

Next Up

With Fed hike expectations seeming to book-end the week here, next week’s calendar will bring us a little more tangible macro data: The March Jobs report is due a week from today (Friday.) With Powell & Co. having put such importance last week on the labor market recovery continuing at pace, investors will be eager to see if things are continuing to tighten up (as indicated by Thursday’s surprisingly low Initial Jobless Claims number.)

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.