GoldPrice.

Happy Friday, traders. Welcome to our weekly market wrap, focused on the news and economic data that means the most for the gold market as well as the Dollar and other correlated assets.

Gold prices are steadying mid-day in the face of some profit taking. Though US markets are rediscovering some risk appetite on Friday, gold is holding on to the majority of its gains for the week and at the time of writing can be traded nearly $40 above Sunday’s opening prices.

So, what kind of week has it been?

Monday: Gold Prices Rallied Above $1700 Again as Turmoil Rocked the Energy Markets

The week began with a relatively calm day of trading for gold prices, buoyed by some degree of safe-haven demand throughout markets for lack of any other dynamics taking hold on a day with limited news flow. Gold spot prices traded within a fairly narrow range during the US session; a brief attempt near midday to rally back above $1700/oz quickly proved unsustainable, but mostly the chart showed support around $1690. The support seemed reliable enough and the band of the day’s trading subdued enough that it gave a false impression that a low-energy week might be ahead of us.

The biggest story in markets of course was the unprecedented collapse in oil prices. Already on rocky ground as global markets struggled to price a major commodity for which there is very little demand and rapidly limiting space around the world to store it, West Texas crude got slammed by the chaos that is always a possibility the day before expiry of the current futures contract. To the shock of all, barrels of WTI crude on the expiring contract dipped near $40 below zero. If you pulled oil out of the ground on Monday, you’d have to pay for the benefit of having it taken off your hands.

Definitely the chart of the year https://t.co/PmEWLRw7ji

— Dow (@mark_dow) April 20, 2020

It was surprising not to see such a drastic and dire capitulation by one of the key raw commodities passing through to the gold market in a measurable way, although in hindsight we can say now it was only a delayed reaction.

Elsewhere in markets, US equities had a moderately red day to begin the week but were supported mildly by messaging from Congress that Tuesday would bring a Senate vote on some $500 billion in further stimulus measures focused on small businesses and hospitals. The US Dollar rose for the day, and US Treasuries seemed to be seeing a stronger flow of safe haven buying than gold, with the benchmark 10-year yield constantly threatening to push below 0.6% once again.

Tuesday: The Pressure of Oils Collapse Damaged the Commodities Complex, but Gold Managed to Find Valuable Support

The gold market showed a little more life and volatility starting on Tuesday, although most of it came before lunchtime. Spot prices took some hard selling during the European session, pushing well below Monday’s supported line at $1690. While the steepest parts of the sell-off were curiously timed with a surprising surge in consumer expectations in Europe, it would be clear from the rest of the Tuesday trading day that the broad commodities complex was catching up to the carnage in crude oil futures the day prior. The raw commodities more tied to industrial use than gold were taking the bigger hit: silver prices dropped back below $15/oz and while gold prices recovered later in the morning silver was unable to find the same momentum.

Gold did recover though. After finding the bottom just ahead of the US cash open, the yellow metal rallied hard as equity markets began trading and rebounded as high as $1685/oz within the hour. Over the remainder of Tuesday’s business, the headwind created by weakened commodities market and the tailwind created by the uptick in market risk aversion mostly canceled each other out while gold traded a narrow band between $1680-85.

The dramatics in Monday’s energy market wasn’t immediately calmed by contract expiry. On Tuesday, the now front-month June contract for US crude fell more than 40% and the economic uncertainty injected through financial markets again pushed US stock markets to their worst single day performance in three weeks. Without the counterweight of being tied to other commodities, the US Dollar and Treasuries enjoyed stronger momentum from the search of safe havens; yields on the 10-year note again fell below 0.6%

Wednesday: As Buying Returned to Most Major Assets, Gold Regained $1700/oz

The European morning turned out to be an active period for the gold market once again midweek. Asia and Europe’s equity markets moving higher happy to be on the other side of earnings season, and the positive sentiment led to a little bit of everything being bought including gold. Although Brent crude oil prices had fallen again with the start of trading in London, buyers began to step into the oil market ahead of US trading. The prospect of energy markets recovering from a historically damaging start to the week rippled through commodities prices and gold, having pulled back from an unsuccessful first attempt to break $1700, then pushed through the line of resistance with momentum and so far this week has traded $1705/oz and higher. Silver, meanwhile, has held its regained position above $15.

Although the core issues of too much supply and too little demand—to go with far too little storage capacity on hand—certainly remain in play for oil prices, crude’s morning recovery became a full-sized rally as WTI prices rose nearly 20% on the day. As the oil chart began to recover so did the markets’ risk appetite, and most major assets continued to see strong buying. As US equities moved higher to arrest their two-day slip and the Dollar had another strong day, gold continued to be bought as well. Adding to the market optimism, the US House of Representatives appeared prepared to pass (on Thursday) an additional $484 billion in fiscal relief approved by the Senate. The only major asset class that didn’t’ really get a lift on Wednesday’s wave was US debt, as sellers had their day in the Treasuries market and raised the benchmark yield back above 0.6%.

Wednesday wasn’t all happy news, however. By midday at least some volume of the rebound and rally seen in US crude markets was owed to inflammatory instructions and warnings from Donald Trump that the US Navy should respond with serious force to any perceived threat from Iranian vessels. That a sitting US President making hardly veiled threats against Iran somehow hasn’t made it above the fold on many of the news sources I track is a pretty accurate microcosm of the crazy time we’re living through right now.

Gold prices closed at $1715/oz in the spot markets on Wednesday, poised to move higher.

Thursday: Gold Prices Rode Distressing Economic Activity Data Higher

Following some mild weakness in the Asian trading hours as the predominant equity indices in the region recovered from Wednesday slump, gold prices took off in the European morning once again. This time the trade was driven by typical risk-off mechanics as the outlook for the European economy was dealt a succession of battering blows on “PMI day.” One by one Markit’s index numbers on composite economic activity for the core of the EU economy, for the Eurozone as a whole, and for the UK were reported not only in a dire state but exceedingly below already depressive expectations.

ICYMI overnight
IHS Markit Eurozone PMI and GDP

Flash Eurozone PMI Composite Output Index 13.5 vs 29.7

Flash Eurozone Services PMI Activity Index 11.7 v 26

Flash Eurozone Manufacturing PMI Output Index 18.4 v 38.5 pic.twitter.com/lhDbMo3zQV

— CHI(@chigrl) April 23, 2020

These kind of misses to the downside could materially affect some models for a recovery timeline in Europe, so we’ll be keeping an eye out for that. Gold, for its part, rode the strong tailwinds to as high as $1730/oz just ahead of the week’s US labor market data.

Initial Jobless Claims reported this week were slightly better than expectations, coming in at 4.27 million vs. 4.5 million expected. (I’m sure that seems as absurd to read as it did to write. If we all say it aloud we might actually go mad.) Gold prices actually dipped a bit in a (likely algo-driven) burst but shot higher again at the open of cash trading in US equity markets as stocks initially took a big step forward. Investors seemed to be celebrating continued stability both in the efforts to curtail the spread on Covid-19 and the energy market where Brent and WTI both continues to recover. While Markit’s PMI data for the US also painted a gloomy picture, the degree of the decline held much closer to expectations and lacked the risk-off shock of Europe’s bad morning.  Gold prices rose steadily through the morning on the move an reached a high for the day just below $1740 before settling and closing back at $1730.

A late session market-mover for Thursday was the disappointing (though disputed) report that a trial of Gilead’s Covid-19 drug had performed poorly. The shock of negative news sent US stocks reeling just before markets closed and sent a flush of safe haven buying into gold (which faded in pretty short order.) The Dollar moved to its highest point in two weeks on Thursday as it continues to siphon some of gold’s safe haven momentum.

Friday: Profit-Taking has Weakened Prices Ahead of the Break, but Gold Remains Up $30+ for the Week

Gold prices are trading lower for the day as we head into the weekend, but still at a nearly $40 premium to the week’s opening price (at the time of writing.) A flatter overnight trading session brought the yellow metal into the US morning start just below $1735, where it continued to trade through the release of “it’s bad, but it could be worse” Durable Goods Orders data. The 14.4% drop in the overall number is grabbing headlines, but it bears mentioning that the data exclusive of transportation (in this context, mostly airline) orders was much “less bad” than expected.

Somewhat surprisingly, the data that’s impacted gold prices the most this morning was the final update/revision to the University of Michigan’s consumer sentiment surveys, which showed some green shoots:

U.S. consumer sentiment showed signs of stabilizing in late April https://t.co/3pCwqgH3Mv

— Bloomberg (@business) April 24, 2020

The updated report coincided with some rise in US stocks and a sharp sell-off in gold as the market leapt at a surge in risk appetite. The profit-taking trades, through a volatile few hours of trading, ultimately pushed gold down to the vicinity of $1710, before the precious metal rebounded to its current price of $1720.

Equities are mostly flat as we move into midday. The Treasury market has showed some mixed results so far, and the muddy waters of the oil market appear to have calmed ahead of the weekend.

Next Up

Next week’s economic calendar is back loaded with some major—and, this time, probably very distressing—data points. Wednesday will be the big round, with our first look at the damage to Q1 GDP coming in the morning, and then the first mid-shutdown FOMC decisions announced in the afternoon. Later in the week: the Fed’s PCE inflation data which will likely appear stable but should be accompanied by painful declines in personal spending and income levels.

I hope you all enjoy your weekend, traders. I’ll see everyone back here on Monday for our usual look ahead to the market week.