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 other key correlated assets—and may continue to into the future.

Gold prices have softened somewhat in the first half of Friday trading but still look poised to maintain some moderate gains for the week in what may be gold’s strongest week in the last five.

So, What Kind of a Week Has it Been?

This week has been a lesson in how vulnerable gold pricing— more specifically, investors’ sentiment toward gold pricing— can be to the whims of the market and its investor mob mentality in periods over which there is very little in the way of meaningful macroeconomic data or even headline news-flow. Instead of the typical drivers that we can often project and price around in gold, other commodities, or the US Dollar markets, one of the yellow metals’ biggest movers this week has been a (somewhat surprising) monetary policy decision by a foreign central bank and its impact on investors’ mindset and mood ahead of the Fed’s own decision day next week. True enough, gold is poised to close one of its most positive weeks in over a month but may have been positioned for a more profitable rally had it not been for the news from north of the US border.

We also saw some surprising sensitivity to second or third-tier US economic data, another consequence of a schedule with no major metrics released. On Monday morning, the latest ISM Services Index survey printed, with the headline number falling where the consensus expected a margin rise, now sitting just a hair above the 50.0 breakeven for the growth/contraction indicator. Immediately, it was clear that investors and observers interpreted this as an early warning sign of a potentially more serious economic slowdown resulting from the Fed’s aggressive effort to tighten financial conditions in order to tamp down on US inflation. Put more succinctly: it was interpreted as a piece of data that paints the FOMC into a corner where they must pause next week (and begin cutting rates sooner than planned) or else drive the US economy (and the global economy, as a result) into a deep recession. On the promise of lower rates sooner, US Treasury yields fell fast, and gold spot prices rallied sharply on Monday, picking up roughly $20/oz. The precious metal crested and settled near $1960.

Gold benefitted from a similar reaction function on Thursday morning. Given the outsized impact that the month Jobs Report (particularly the Non-Farm Payrolls number) has had on market sentiment for well over a year now, and the apparent disconnect between moderately elevated weekly unemployment data and the blockbuster beats the NFP prints to describe a deep, robust labor market in the US, the Initial Jobless Claims data that is released every Thursday (on a one-week lag) has fallen out of focus as an acute market driver. But, of course, we found ourselves this week with little else in the way of actionable trading inputs for the gold market as a whole. So, when the Claims number came in above expectations (+260K vs. +230K), this too was digested by investors as direct pressure on the Fed to pause hiking rates in advance of beginning to make cuts. Gold prices rose quickly again, turning in another session with a $20 pickup.

So, how is it that the market closed on Thursday with gold only at $1965/oz and not significantly closer to $2,000?

As opposed to the Federal Reserve, whose FOMC is contemplating a break in the rate-hiking cycle, on Wednesday, the Bank of Canada ended its recent rate-cycle pause by hiking the CAD overnight rate. While certainly not as directly influential on the US Dollar or its rate markets as, say, the ECB or the Bank of England, this move by the BoC has been read as potentially providing cover for the Fed to continue hiking rates next week. The US currency itself didn’t react in a strong way to the news, with the Greenback trading through the session with relative calm. The Treasury market was a different story, with bond prices dropping quickly, pushing the benchmark yield on the US Treasury’s 10-year note to a new monthly high. Under the same pressure that laid bonds low, gold spot prices shed the majority of Monday’s gains before settling and consolidating at $1945, still nominally representing a gain for the week but well off the pace of earlier in the week.

(Perhaps) To the gold trader’s relief, this key data vacuum will not be an issue in next week’s trading. Not only will we finally hear the FOMC’s next policy decision (and possibly how it projects changing the path ahead,) which will certainly be the focus of the markets all week, but we also have the newest evaluation of US consumer inflation due Tuesday, and Wednesday’s Fed Day will also deliver updated economic projections from the US central bankers.

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 next week for another recap.