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.

Having slipped a bit farther beyond Tuesday morning’s slide, gold prices are closing the week sharply lower than their levels ahead of the Labor Day holiday. However, the yellow metal has managed to stabilize and consolidate for two consecutive sessions and could be in a position to take more positive steps in the weeks ahead.

So, what kind of week has it been?

This holiday-shortened trading week as felt as such for many in the gold markets; not so much because the time seemed to pass quickly—it certainly didn’t—but because the yellow metal’s chart experienced a lot of (downward) movement when markets first returned to full-attendance, and then things went mostly quiet.

• As we covered in Tuesday’s preview piece, financial markets by that morning had snapped into what would remain their patterns for the week, and that meant gold prices moving sharply lower in contrast to a resurgent US Dollar and rallying Treasury yields.

Gold prices initially steadied on Tuesday afternoon before experiencing a minor echo of Tuesday’s collapse at the start of cash trading for Wednesday’s session. The range of the Wednesday sell-off (which corresponded with another strong morning for the US Dollar) market the trading range for gold spot prices through the remainder of this week: Resistance at $1799/oz, support at $1790.

• Despite the deep losses that gold has taken this week, the combination of a truncated trading week and an especially sparse news and economic calendar means that gold’s slide has been a result of a generally bearish environment for the yellow metal rather than any strongly negative events or data points putting pressure on its fundamental trajectory.

So, what created such an uncomfortable environment for gold this week? It seems that a stark shift in investors’ mood and sentiment that we suggested last Friday might come to pass, mostly did. Having set aside last week’s seriously disappointing payroll numbers from the August Jobs Report, investors were forced to reckon with the impact and implications of the data pretty immediately on Tuesday as several major analyst teams kicked the week off by downgrading their growth projections for the US and global economies through the end of this year.

The driver of these negative revisions, whether stated or implied, mostly came down to confirmation of the Covid-19 delta variant’s clear impact on the “post-“ pandemic economic recovery in the US—the strongest evidence for which is the big NFP miss.

• Outside of (though never entirely disconnected from) gold markets, the impact of this sour mood resulted in a feeble week for US equities.
• US stocks, at the time of writing, have suffered four consecutive days in the red. Friday’s sessions is looking “mostly flat” for the major indexes, but could ultimately be another loser as investors have stayed mostly risk-off throughout the week.

The key link between slumping market sentiment (and stock prices,) and the gold market has been the strong resurgence of the US Dollar. The clear dynamic this week as been that of the Greenback being the clear first-choice safe haven for investors pivoting out of US stocks.

• The preference for the US Dollar in risk-off markets is often doubly tough for gold prices. Not only does strong Dollar typically imply weaker gold values in investors’ minds, but it also means the Dollar is stripping interest away from gold as a play for safety.

Taking a step back, there’s reason to believe the that this week’s bearish mood for gold prices may not be terribly persistent. Thursday seemed to indicate the first step towards a more generally positive market mood: The ECB on Thursday took great pains—just as the US’ central bank leaders have done recently—to signal that aggressively supportive monetary policy is not going away any time soon (this was an underlying concern for global equity investors through much of the week). And, though we saw just last week how a run of falling unemployment claims week-to-week does not guarantee strength in the key monthly Jobs Report, markets had to have been soothed to some degree to see Initial Jobless Claims fall to an 18-month low this week.

As I said at the top, it’s been a short week that has felt very long for many investors, and that may be to blame for a generally unenthusiastic turnaround in market performance on Friday even as investors’ mood, at least anecdotally, seems to have improved.

• With a full week of trading and a fresh slate next week—not to mention an updated read on consumer inflation in the US economy and Retail Sales performance—it’s certainly possible that we might see the gold market (alongside the US stock market) shake off this downer of a week and attempt to carry some of August’s strength into the final month of Q3.

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.