GoldPrice.

Happy Friday, traders. Welcome back to our weekly market wrap. Following a round-trip of a trading week—but one that lacked the neck-breaking volatility that wreaked havoc through much of March—gold prices are trading slightly lower than the prior week’s close.

This week we saw the gold market trade surprisingly unreactive to cadaverous data around the US labor market, while being strongly influenced by developments around the recently collapsed price of oil.

So, what kind of week has it been?

Monday: Metals Prices Weakened as Oil Bottomed Out

Monday’s newsflow was relatively calm, especially in the second half of the session after our regular preview peace went out. Gold prices showed a lower level of volatility than had characterized the last few weeks but were under a mild amount of pressure from some other trades. After Asian markets were lower, the major US equity benchmarks saw gains for the fourth time in five sessions; European stocks managed to squeeze out gains as well for the day. This appeared to be driven by a creeping return of risk appetite that was also pressuring gold (and other safe haven) prices a bit, leading us to speculate that we might be returning to the normalcy of a “stocks up, gold down” dynamic.

Also weighing on metals prices was the drag of a collapsing crude oil price, which has been yanking down on the broad commodities complex for weeks now. West Texas barrels fell below $20 on Monday, and Brent Crude marked an 18-year low as the crash in global demand created by the Covid-19 crisis was met by a massive flood of oversupply driven by an escalating price war between Russia and the OPEC core. In what would be a reoccurring line for the week, on Monday brought the first signs that the White House might split some of its strained focus to intervene in the production dispute. Silver, always more sensitive to broader moves in the raw commodities complex due to its industrial utility, was hit harder by the drag of crude prices to start the week.

Monday also had some slightly more positive news for the world and markets: viral case numbers in Europe showed some signs of slowing, and an influential FOMC member made efforts to reassure Americans and investors that the US monetary system can sustain the staggering increase in debt that the Fed will take on in its efforts to support the economy. Notes like this added to the day’s shade of risk-appetite and precious metals were pushed a little lower towards the end of the day before a buying bounce saw gold close in the $1620 range, silver just above $14/oz.

Tuesday: Brief Surges in Risk-Appetite Brought Gold Prices Below $1600

Gold prices floated lower during overnight trading, and then pushed below $1600/oz as the trickle of risk-appetite appeared to strengthen to a middling flow on Tuesday. Some of the market’s desire for risk was increased through the US trading session by POTUS’ calls for an expansive $2 trillion infrastructure spending bill to act as another tranche of stimulus for the American economy; congressional Democrats vocalized some level of support for the idea as well. Gold prices traded lower in an orderly fashion through the day, closing near to $1580/oz while the Dollar rallied.

Not all asset classes saw the benefits of the risk-on mood, however. US equites fell on Tuesday, with the S&P wrapping its worst quarter since the Great Financial Crisis and the Dow its worst since 1987. In evaluating the day’s charts, it’s important to recognize that these moves—the steady selling in gold as well as US stocks—were exacerbated by typical end-of-quarter re-positioning and re-balancing.

Wednesday: Gold Prices Recovered as Worsening Numbers Snapped Global Market Optimism

Of course, we are trading and making markets in an environment that’s pretty hostile to any optimistic inkling right now, and this was underlined in Wednesday’s markets. Investor confidence and the nascent return of some risk appetite were both abruptly halted by an astonishingly negative day of headlines and raw data around Covid-19’s spread.

Pentagon aiming to get 100,000 body bags for FEMA coronavirus response, report says https://t.co/N6gyVHoabJ

— CNBC (@CNBC) April 1, 2020

Adding to the global sense of instability, Wednesday saw the start new tension between the US and China, with US intelligence officials reportedly telling the White House that Chinese authorities concealed the true extend of the virus’ outbreak and their rates of infection/casualty. The White House publicized the confidential report on Wednesday. By Thursday morning, China countered by saying the report was a fabricated attempt to shift the blame for the US administration’s own ham-fisted attempts at early containment. Without getting ahead of ourselves, we’ll need to keep an eye on this new point of friction as any hopes for a timely global recovery post-crisis will be DOA if we enter into it with an immediate resumption of 2018-19’s trade war between US and China.

US stocks were rocked and roiled lower once again, as the Greenback rose alongside an accelerating flight further into Treasuries which briefly drove the benchmark 10-year yield below 0.6%. Although it appeared that another squeeze for margin-paying cash might once again compel mass-liquidation of gold positions, the yellow metal held strong support at $1575/oz throughout the day, and it’s more usual safe-haven tailwinds lifted prices to close at $1590.

In terms of economic data, Wednesday saw two meaningful releases. Both the ADP monthly payroll number, and the ISM’s index on US manufacturing managed to come in considerably “less bad” than was broadly expected. My prediction from Monday that macro data would come to the fore of the market drivers this week has proved to be incorrect, as the gold charts were little moved by either of Wednesday’s data sets (although the bare facts of a decline in ADP payrolls likely helped to boost a jump to save-havens when US markets opened an hour later.)

Thursday: Gold Prices Regained a Major Psychological Level as Oil Prices Surged on Headlines

Following a relatively calm overnight session, rising risk aversion in global markets continued to support gold’s safe-haven status. The biggest driver for gold prices (commodity prices in general, really) though, and the input responsible for lifting the yellow metal back above $1600, was a resurgent oil market. The White House had made moves Wednesday evening towards getting involved with the deep crude market rout, and early Thursday morning came reports that China would act on bargain basement prices and begin buying oil for its massive strategic reserve. The Chinese headlines saw crude prices rally more than 15%, and gold rode the wave to top $1600. Moves in and around the oil market would end up being the main driver of the business day, with futures contracts for crude ultimately surging more than 20% on Thursday as investors and hedging desks made cautiously optimistic moves in response to Donald Trump’s (so far unconfirmed) claims that both Saudi Arabia and Russia will be making substantial cuts to their output.

Fear and risk-aversion didn’t fade into the background, however. Thursday’s Initial Jobless Claims printed in what looked like another cataclysmic number, reporting another 6.6 million new unemployment claims last week. (I do really hope these numbers go down before the shock wears off enough for me to stop italicizing millions.)

BREAKING: US weekly jobless claims total 6.6 million, vs 3.1 million expected https://t.co/atkCqHjXy2

— CNBC Now (@CNBCnow) April 2, 2020

Incredibly, that’s roughly double last week’s door-buster, and nearly double what analysts were projecting. It was a little odd, then, to see little in the way of an immediate reaction from risk-sensitive assets like gold; although the yellow metal would rise over the course of the day alongside oil and other commodities, to what has become a comfortable level around $1615/oz.

US stocks also seemed to focus more on developments around the crude market than in the labor market, as the Dow and S&P rebounded. And undercurrent for this market week turned out to be the surprising lack of sensitivity in many major assets to a run of dire employment data.

Friday: Gold Prices Appear to Trade in a Vacuum Following Dire March Jobs Report for the US

That thought brings us up to Friday’s end-of-week session. You wouldn’t know it by looking at any of the core markets we cover here, but this morning’s March Jobs Report announced an incredible loss of 701,000 jobs for the month and a spike in the unemployment rate to 4.4%.

March jobs report: U.S. economy loses 701,000 payrolls, unemployment rate jumps to 4.4% https://t.co/Ij1GFsuZzX by @emily_mcck pic.twitter.com/tsuc5x8Xbv

— Yahoo Finance (@YahooFinance) April 3, 2020

 It’s painful but necessary to point out that these numbers may well be running so high even without accounting for the last week’s burst in jobless claims.  

True enough, at the time of writing, the benchmark indices for US stocks are each trading down over 2.0% for the session and the 10-year Treasury yield is once again struggling the show a yield over 0.6%; but I would’ve argued 12 hours ago that the labor market carnage we saw this morning would’ve brought much deeper moves into the red margins. Even more surprising has been a relatively listless gold prices, which is well supported, but the market seems broadly uninterested in pricing the yellow metal above $1620/oz.

Some of this tempered response can maybe be attributed to a much better than expected showing from US service-sector PMI this morning, giving battered optimistic something to look to as we head into the weekend. Still, it shouldn’t be able to overrule labor market concerns.

Next Up

Whatever the reason for gold’s listlessness so far today, I do think it lessens the odds of a concentrated sell-off from profit takers to wrap up the session, so we can start to look ahead at the next week of market movers. The data docket will bring us a look at consumer inflation for March, but the main focus will be midweek with the release of minutes from the FOMC’s most recent meeting that resulted in the emergency cut of short-term rates to near 0%. Of course, it’s clear that developments in job losses (maybe?) and the price of oil (definitely) will continue to ripple through to gold markets, so we’ll be keeping our ear to the ground there as well.

For now, do your best to enjoy your weekend, traders. Let’s all look forward to a better world in Q2, and I’ll look forward to seeing you all back here on Monday for our look at the new week ahead.