GoldPrice.

Happy Friday, traders. Welcome to our weekly market wrap, where we 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.

With markets offline on Friday for the Good Friday/Easter holiday in Europe and the US, gold has locked in a slight gain, on net, for the week’s trading thanks to a last-hour pop in some very thin Asian-market trading overnight.

As we’ll discuss in today’s market wrap, gold spent the first part of this week under the crush of volatility returned to the US Treasuries market; But the yellow metal has turned in a performance that implies some upside for the immediate future.

So, what kind of week has it been?

In a week absent of any other key drivers, gold price often found itself (again) at the mercy of the bond market. The yellow metal’s weakness to begin the week and its worst loses—spot prices fell as far as $1680/oz on Tuesday and Wednesday—correlated with strong and steady selling in US Treasury markets that pushed benchmark yields on the Treasury’s 10-year note to new 12-month highs. In the second half of the week, precious metals (and other raw commodities’) prices have recovered at the same time as the bond market has mounted a recovery.

• It’s not necessarily a 1-to-1 correlation, however, which I think bodes well for gold prices going into Q2. The US trading session on Wednesday began with Treasury yields well off the top, and that morning we saw gold spot prices rally strong and steadily off the floor and back above $1700/oz. And while yields again spiked as high as 1.74% that afternoon, gold suffered only a moderate pullback from the daily high.
• With Treasury yields softening on Wednesday and Thursday, the US Dollar has come off its weekly peaks as well, further encouraging gold’s recovery. With the headwinds of a strengthening Greenback and spiking interest rates calmed, the yellow metal managed to rally all the way back to just shy of even with Sunday evening’s opening levels.
  • A flash higher during sparsely-traded Asian hours of Thursday night/Friday morning has actually lifted spot prices to a net gain for the week, with Globex trading closed with gold just below 1735/oz. This last pop may be quick to unwind when trading re-opens after the weekend, though.

As I said, I think the week’s trading is generally a positive development for precious metals prices heading into next week, and the earnest start of trading for April and Q2. While it’s clear that gold’s chart is still vulnerable to strong, moves higher in yields—likely independent of what may actually be fueling those moves—prices continue to recover when the initial volatility settles even though yields (and implied interest rates) remain high relative to 2020’s levels.

Alongside the broader global commodities basket, gold still seems primed to take advantage of the “reflation trade” that doesn’t seem likely to fade in the medium-term and by all historical precedents should be a tailwind for raw materials. For now, because these (ever more regular) spikes in Treasury yields most often shock the US Dollar higher as well, gold price rallies are often two steps forward and one step back. Whether it’s an actual calming of the bond markets, or else investors just becoming less reactive to the spikes in implied interest rates alongside general acceptance that the Fed won’t be spooked into action, I’m looking to see if the yellow metal can shake the hitch out of its stride and participate in an earnest rally higher.

• This week’s low for gold trading came on Tuesday, when prices fell as low as 1680/oz, a level that seemed to offer reliable support. The yellow metal’s high-point, technically, is the closing level just shy of 1735/oz; Its high for regular, fully attended trading (after markets opened for the week) was Thursday afternoon’s return to 1730.
  
  • Silver prices mostly followed gold’s charting for the week, bottoming out on Tuesday with support at 24/oz before recovering to 24.85 to end the week. This is a slight net loss on the week.

US stocks were on shaky ground to begin the week, but attention soon turned to a better-than-expected Q1 and a massive government spending plan to fuel growth. Monday brought one of the most closely watched opens to US stock market trading in years and investors, managers, and regulators waited with caution to see if the massive unwind of a busted “family office” that rippled through markets on Friday would expose some serious systemic problems.

• The relief of most, while the NASDAQ and the S&P closed in the red for the day, by Monday afternoon it seemed clear that the massive unwind would be a point of pain for some single (mostly financial) stocks for the next week or so, the overall market will continue as before—for better or worse. Lifted by strong performance in industrials, the Dow gained on the day.

Although worries about the Archegos aftermath has ebbed by Tuesday, stocks now had to deal with the same surge of sellers in the US Treasury markets that roiled gold prices that day. In the face of 10-year yields at a 14-month high and the corresponding spike in the US Dollar’s value, all three of the key benchmarks for US equities were losers on Tuesday. Still, it was hard to feel pessimistic about equities or economic recovery as details of the Biden administration’s next push for major government spending began trickling out, confirming expectations for a level of fiscal stimulus big enough to boost economic growth in 2021 and 2022 even further.

• Sure enough, as the White House on Wednesday began rolling out the details of a first section (with more to come soon) centered on the biggest infrastructure (re)build-up since the 1950s and a large package of assistance for lower-income families, US equities took a strong step forward to break a two-day skid for the S&P and the NASDAQ. (Possibly dragged by a stumble in the energy sector as crude oil prices slipped, the DJI closed Wednesday just slightly lower.
  
  • As Wednesday closed the calendar quarter, investor sentiment was also boosted by the strong returns already turned in to start the year: The S&P gained roughly 6% in the first three months of the year, while the stalwart Dow picked up 8% and the NASDAQ, 3%.
• On Thursday investors kept the party going: All three major indices were in the green to end the week (and kick-off the firs trading day of Q2 2021,) with the NASDAQ and the S&P 500 both clearing more than 1%.
  
  • The S&P 500 rose and closed above 4,000 points for the first time ever. At the start of the pandemic last March, the index had bottomed-out just below 2,200.

A small set of very big outperformances in macro data this week, now combined with the Fed keeping monetary policy light and the White House pushing for further recovery spending, points to outsized growth and recovery for the US economy this year and next.

• Friday’s Jobs Report blew the doors off of most economists’ and analyst’s expectations, reporting a booming 916,000 non-farm jobs added in March; The consensus estimate was for 675K.
  
  • The report also added more than 150,000 jobs to the February count, and reported headline unemployment falling to 6%.
• Adding fuel to the optimistic fire, on Thursday the ISM evaluation of growth and outlook for the US manufacturing sector rose to its highest level in more than 35 years.

It sure looks like accelerating growth, and the pursuant “reflation trade” is here to stay for the US economy, through this year and likely into 2022, with the Fed likely to keep the taps wide open. It’s certainly odd to see gold—so often charted in contrast to roaring stock prices due to its traditional safe haven status—push higher under the same circumstances that allow equities to climb; But this is to generally be expected if we really do see the surging levels of economic growth many now expect in the US. The same outlook—more building, more demand—that is driving more cyclical stocks higher also implies a need for commodities supply, pushing the price of raw materials like gold and silver higher as well.

The immediate risk to keep in mind, however, is that a lot of the improvement we saw in gold (and equities, of course) to end this week was driven by the announcement of the White House’s intention to get such a massive spending project passed through Congress. The path to doing so, for technical and (unfortunately) political reasons, will be a much narrower walk than was necessary to pass and enact March’s American Relief Plan. Today’s booming investment sentiment could be dampened considerably depending on how tough of a time the Biden Administration has in bringing their plans to fruition. 

Next Up, our immediate focus to being next week will be on the market’s mechanics themselves: Friday morning’s important labor market data was release into a vacuum with markets closed for Good Friday in Europe and the US, so there may be a rush to reposition as soon as global trading re-opens on Sunday evening and into Monday morning. It’s very difficult to say what to expect, directionally speaking; But some initial volatility is likely.

After that, we’ve got a look at service sector expansion on Monday (to see if it’s keeping pace with the growth in the manufacturing sector,) and on Wednesday we’ll get the discussion notes from March’s FOMC meeting. While Fed members were quiet this week, I expect the FedSpeak schedule for next week will be a little busier and provide some insight on how participants see President Biden’s newly proposed flush of fiscal spending impacting the US economy.

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.