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 returning a net-loss for the week after being roiled—alongside other key asset classes—by a moment of market doubt on Thursday. Despite the step-down in price, Friday as been a strong performance for the yellow metal, suggesting conditions remain in place for support (even in not outright strength) heading into the summer months.

So, what kind of week has it been?

At the end of a holiday-shortened week that signaled the start of summer, it’s not surprising that we don’t have a lot of action to talk about; But the big focal point this week had been sitting at the tail end and arrived just this morning with the release of the US’ May Jobs Report.

The headline numbers represent a positive step forward and a step forward on the path of recovery for the US labor market following an abrupt step backwards in the month prior.

• The Non-Farm Payrolls number of 559,000 jobs added in May proved a solid rebound from the worrying sub-300K reported in April.
• And the headline unemployment rate in the US, dropping to 5.8%, suggests more stability as the recovery continues. This is the first time unemployment has fallen below 6% since the pandemic began.

However, while investors certain let out a sigh of relief to see stronger data this time around, markets on Friday are clearly more focused on what the May Jobs Report didn’t do; Which is to say, it didn’t quite live up to expectations.

• While Friday’s NFP represented an objectively strong number of jobs added to the US economy, it was still nearly 100,000 short of the 650K projected by the market consensus. And, looking more broadly, the US labor market is still employing more than 7.5 million fewer Americans than before the Covid crisis of 2020.

While the numbers certainly demonstrate that there is every reason to remain confident in a US economic recovery in 2021 and beyond, it’s clear that the process isn’t going to move as rapidly as some projected and/or hoped earlier this year. As a result, we’re seeing Friday’s session dominated by the further erosion of any concern or expectation that the FOMC will move more quickly than planned into a phase of tapering the Fed’s massive asset purchasing program (and, from there, into a phase of tightening interest rates.) As we’ll discuss shortly, investor suspicion that May’s payroll numbers could move the Fed closer to ending the easy money party left a clear stamp on financial markets on Thursday; But most of Friday’s trading has been focused on erasing that mark.

• Immediately following the release of the May Jobs Report, gold spot prices began a sharp rally higher, gaining more than $20/oz by the time US cash trading opened for the day. US equity markets are also well into the green on Friday, as both asset classes are enjoying more investor support now that markets have been reassured that a time of rising interest rates remains well over the horizon.
• Thursday’s trading, mostly during US market hours, had upended a fairly calm four-day week for our relevant markets. As investors appeared to rush to position themselves for a Friday Jobs Report that might include an NFP reading well above expectations, the re-opening/reflation trade abruptly halted in the shadow of a possible hawkish turn for the Fed.
  
  • As benchmark yields on the US Treasury’s 10-year Note surged back above 1.6%, gold spot prices tumbled and quickly lost grip on support at $1900/oz. The yellow metal fell for most of the morning, before finally seeing buyers step in ahead of $1870 to stabilize the chart for the rest of the day.
  • US stock markets were also roiled on Thursday by the sudden rise in yields and expectations: All three key indexes were in the red, with the growth-reliant NASDAQ bearing the worst of it.
  • There’s been some speculation that Thursday’s ADP report on private payrolls, which was well above expectations, might be primarily responsible for the day’s market tightness. But, since the trend appears to have initiated much earlier during the European market morning, it’s more likely this was an accelerant rather than the catalyst.
• The release of Friday’s labor market data kicked-off what really was a sharp reversal of Thursday’s duck-and-cover maneuver: alongside a resurgent gold chart and steady stock market gains (led by a reanimated NASDAQ,) Treasury yields have given up Thursday’s gains—and then some—with the 10-year yield now well below 1.57%.
• Looking ahead on the Fed calendar: Because the key data in May’s Jobs Report—especially the falling unemployment rate—remains an overall positive sign for US growth and recovery, it still remains possible that the FOMC could introduce forward guidance about tapering following a July meeting; That, however, now feels considerably less likely.

With gold’s end-of-the-week rally slowing near the $1890/oz level, it’s unclear if the yellow metal will immediately have the momentum or market interest, at the start of next week’s trading, to push back to-and-through $1900; But it’s a move that will need to happen if gold is to continue its rally and not peter-out in the slow summer months. The chart does seem to be consolidating well at current levels as we head into the weekend, which is a hopeful sign.

Next week we have a light calendar, with the FOMC moving into a quiet period ahead of the June meeting. The main data point ahead will be an updated assessment of inflation via the CPI number set; Our attention in the headlines will be draw toward the Biden administrations continued efforts to drive another burst of fiscal stimulus for the US economy by way of their massive infrastructure bill.

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.