GoldPrice.

Happy Friday, traders! Welcome back to our weekly market wrap, taking a look back at our last five trading days with a particular focus on the news, market narratives, and economic data that had the biggest impact on the gold markets, as well as the US Dollar and correlated assets, and may continue to in the near- to medium- term.

After an initial jump to new highs on Sunday evening, gold prices have traded a tumultuous week that leaves the gold metal, at the time of writing, at a loss for the week but still in an elevated position with the potential to run higher in coming weeks, as the general macro and geopolitical environment becomes increasingly more beneficial for the traditional safe havens. Whether or not gold can push past the strong resistance apparently in place at $1750/oz remains to be seen. Silver, meanwhile, has had a much more successful week, holding onto the majority of its gains from Sunday night’s surge and trading above $17/oz in spot markets.

So, what kind of week has it been?

Monday: An Optimistic Start to the Week Wiped Out Big Sunday Night Gains for Gold, but the Yellow Metal Held on to the Majority of May Gains

With most of the gold market action for Monday playing out before lunchtime, we were able to cover the important moves in our weekly preview post, found here. Risk assets continued the exuberant rally throughout the trading session, with the Dow rocketing more than 900 points higher and a surge in the S&P benchmark pushing the index to its highest mark since the start of March as investors allowed themselves to give in to the optimistic ideation of some positive results in early-stage testing of a COVID-19 vaccine; the spike in risk-appetite had also driven selling in Treasuries and the 10-year’s yield took another trip above 0.7%  As the initial energy of the opening rally wore down, gold prices found reliable support at $1730/oz—a net loss for the trading session, but still well elevated compared to recent weeks.

Silver, which had surged higher alongside gold in the overnight hours to spot prices better than $17/oz enjoyed a good deal more support through the US trading session and managed to hold above that major psychological level of resistance-turned-support.

Tuesday: Monday’s Narrative—and Price-Action—Quickly Unwound, Gold Spot Returns to $1745 while Silver Stays High   

Although gold prices experienced some weakness in overnight markets, it was clear by Tuesday morning that the yellow metal’s slow Monday afternoon was not a “top” but rather just pause in the recent rally. For gold as well as the major US stock indices, Tuesday’s session in fact saw a considerable unwind of the movement and momentum that started the week.

The change of tone and trend was driven primarily by reports that the vaccine study whose positive findings had sent US equities and risk appetite soaring to such highs just the day before, in reality (for now) lacks the completeness to be taken seriously.

Vaccine experts say Moderna didn't produce data critical to assessing Covid-19 vaccine https://t.co/ktZ9BorYVV

— CNBC (@CNBC) May 19, 2020

The share price of Moderna, the pharma firm that is conducting the trials, fell from record highs on Tuesday with enough velocity to drag the overall US stock market down alongside it to finish the day at a loss. Conversely, safe haven assets like gold rallied through the day. Gold spot prices also  enjoyed a tailwind from the Senate testimony of Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin, which alternated between warning that there may still be a need for monetary and fiscal stimulus to support the US economy through the current crisis and into a recovery, and the promise that it would be forthcoming. The bullish environment for gold saw the yellow metal’s spot prices rise back above $1745/oz before the end of the session.

New Housing Starts in the US for the month of April were reported on Tuesday morning, and fell to a five year low as the count came in under 1 million.

Wednesday: Gold Prices Held Temporary Support Near $1750 in a Quiet Trading Session

The release of discussion minutes from the FOMC’s meeting ending April 29 held the market’s focus in a quiet Wednesday trading session. As we covered in our breakdown of the minutes (found here,) the internal notes and discussions were a fair echo of the committee’s post-meeting statement two weeks ago highlighting serious concerns about the damage done to the US economy by the current crisis and outlining the Fed’s preparedness to take additional steps.

Touching as briefly as possible on what’s been a hot topic of late, the FOMC minutes aligned with the public commentary we’ve seen from Fed officials in recent weeks brushing aside the possibility of introducing negative interest rates. While it does seem unlikely that we’ll see that particular tool used, the Fed has already brought to bear tools that it had never previously used—like a much more expansive asset-buying program—in support of the economy; for that reason, we felt it worthwhile to offer a brief primer on the basic theory of Negative Interest Rate Policy, which you can read here.

The Fed’s discussion minutes didn’t offer much in the way of wild positivity, but US stock markets chose to find it in the continuing steps towards economic “re-opening” in the US. With the return of growing optimism (caused, it has to be said, by a lack of bad news rather than reliable good news,) equities reached new 10-week highs in Wednesday’s trading.

Largely unaffected by either the insights from the Fed or a rallying stock market, gold prices experienced some choppy but well-contained trading between $1745-50/oz while silver continued its strong week with spot prices near $17.50.

Thursday: Trade War Worries Gripped and Grounded Global Markets, Gold Prices Fell From Weekly Peaks

The growing tension between the US and China moved to center frame on Wednesday evening and played the dominant role through Thursday’s session. As Donald Trump ratcheted up his antagonistic rhetoric ahead of the delayed start of China’s annual legislative session, the threat of the world’s two largest economies backsliding into trade war clearly started to unease markets. Global equities hit the skids in their Thursday sessions as investors and managers pivoted into the safety of Treasury debt and the US Dollar, reigning king of safe havens. Gold, doubly vulnerable to US-China tension as a result of being both a raw commodity and subject to physical demand shocks from the Chinese market, sank lower through the Asian and European sessions.

From the US stock market opened later in the morning, we saw a pattern repeated in the gold chart from earlier this week: a strong morning move, followed by a tempered rebalancing, and then a calm afternoon into the close. This time, the morning velocity pulled the yellow metal lower as US investors grappled with the growing trade war threat. The Greenback and government bond prices surge higher again, while gold spot prices plummeted more than $15 to challenge previous support at $1720/oz; silver fell back below $17/oz, for a time.

US equities were unable to sustain momentum under the pressure of trade tensions, and the major indices fell into negative territory late Thursday morning. Perhaps supported by a risk-off tailwind from weakened stock prices, gold prices steadied course by lunch time. At the global market close, gold spot had made it back to $1725/oz and silver had regained $17.

Thursday was the busiest day for US economic data, though it was a limp competition this week. Initial Jobless Claims managed to come in along expectations this time, dropping further towards a still horrific 2 million mark and allaying any fear that last week represented a reversal for the worse.       Economic activity data was slightly more upbeat, with the Philly Fed manufacturing survey rallying slightly faster than anticipated (though remaining well away from even 0.0,) and the Markit data sets from PMI in America’s manufacturing and services sectors building positive momentum as well.

Friday: US-China Tension Remains the Key Market Narrative Ahead of Coronavirus as Gold Prices Head into the Weekend With Slight Upward Momentum

So far, on the final trading day in the US before a three-day weekend, the risk-aversion injected into the market by concerns around a deteriorating US-China trade peace (as well as more specific concerns about growth in China) has pushed past what could be absorbed by US Dollar and Treasury markets alone. While bond yields remain lowered and the Dollar has continued to rise, gold prices have steadily unwound some of Thursday’s loses to trade in the $1735/oz range at the time of writing. Silver spot prices took a beating in the Asian session as worries about the near-term prognosis for the Chinese economy dented industrial commodities; while oil prices broke their recent rally higher silver once again had support fail at $17 although in the hours since the grey metal has risen back at pace. Risk assets, like US stocks, are the losers for the day so far as markets stay risk-off heading into an extended break.

Next Up

Looking ahead to next week, after a US bank holiday on Monday we have slightly more to contend with on the data front. On Thursday we’ll take another crack and calculating Q1 GDP for the US economy in what is almost certain to be a notable downward revision to first estimates, and the Fed will close the week by reporting its measurements of price inflation. This still leaves plenty of room for trade tensions to remain a core driver for highly risk-sensitive markets like gold as we close out the month of May.

Enjoy your weekend, traders, and stay safe. I’ll see everyone back here next week for our detailed preview of the economic calendar.