GoldPrice.

Happy Friday, traders.

What kind of week has it been?

Packed with macro and geo-political happenings, to be sure; but also, somehow far calmer than I would have anticipated. On this Friday morning it seems that US Dollar and gold markets feel similarly, as we’re seeing spot price for the yellow metal fall farther below $1240/oz on the back of a pre-market rebound in dollar-strength.

Let’s backtrack and see how we got here.

Theresa May or May Not

UK Prime Minister Theresa May has had a *week.* Kicking off on Monday morning (for those of us in the States,) with May’s unexpected announcement that she would be pulling the “meaningful vote” scheduled for Tuesday in Parliament, in which the House of Commons was expected to soundly vote down May and her team’s proposed Brexit agreement. I say “unexpected” not because there were no signs that this could happen—there were—but because just hours prior her cabinet ministers had confirmed to the press that the vote would be happening.

This, in a nutshell, is how “things are going” in the halls of UK government these days.

The Pound dropped to it’s lowest since April 2017 on the news while gold remained buoyant around $1245/oz. By Tuesday night Sterling was threatening 1.25, and May’s own conservative party announced it had the votes to call for a “vote of confidence” in her leadership. The Prime Minister survived the vote, and her position was either affirmed or weakened by the results, depending on who you ask. Personally, I think she’s in a much weaker position going forward particularly as the whole of EU-27 leadership has restated that the current Brexit deal is the final offer.

None the less, May is carrying on in that very marketable-as-British way, although I suspect she may not be blessed with an overabundance of calm these days. She will be at the EU summit in Brussels today and over the weekend, trying to wring some added “assurances” out of Donald Tusk and Co.

Theresa May's victory in her confidence vote came at a price https://t.co/C4O56Kv7VB

— Bloomberg Brexit (@Brexit) December 12, 2018

At this point, I think we can hit <pause> on the close-watching of this Brexit drama as gold traders. The UK government has suggested the new deadline for a parliamentary vote is January 21 (although they theoretically have until March 29 to kick the can farther down the road,) and throughout the higher-volatility moments for the currency markets this week investors seemed to feel comfortable with gold valued between $1240-45; it seems like we can discount any impact No. 10 Downing Street might have on precious metals markets at least through the start of 2019. I’ll be sure to point out when the stove looks like it’s getting hot again.

May Survives a Vote of No Confidence. But Can Britain Survive Another Brexit Vote? https://t.co/IfYclNUj1e

— Eurasia Group (@EurasiaGroup) December 14, 2018

US Data is Uninspiring

Amid all the political follies abroad and at home—that circus of nonsense in the Oval Office feels like it happened 7 years ago but it was actually Tuesday—we had a somewhat light economic calendar at home and even the flashier releases turned out to be non-events. A quick run-through:

• Both producer and consumer inflation reads came in, more or less exactly as expected.
• Initial jobless claims this week was a more positive result for the US economy than expected, as analysts finally got the week-to-week reduction they’ve been calling for.
• The one flash-point this week for a gold trader was this morning’s as-anticipated US retail numbers, whose release coincided with the first real momentum we’ve seen all week from gold in either direction—having slipped below the $1240/oz line in overnight trading, gold fell sharply as far as $1234 as sellers stepped in. I’m hesitant to really tie the move to US retail numbers as the vanilla report doesn’t really justify the severity of that move—proximity is neither correlation nor causation, and I think it’s more than likely a tidy coincidence.

QE Ends, Not with a Bang…

The most notable macro event for the European economy this week (well, for “the Continent” anyway) was the European Central Bank’s final meeting of 2018 which saw that announcement of the end of quantitative easing through asset purchases.

ECB will end its historic €2.6 trillion bond-buying program, even though the euro-area economy looks vulnerable again https://t.co/GzuX7Cxj7x

— Bloomberg (@business) December 13, 2018

Long anticipated, it arrived with relatively little volatility in currency markets or elsewhere. We also got a downward revisions to the ECB’s economic projections, but the rather dull week for metals markets carried right on through Thursday morning regardless.

EuroArea PMIs Put on the Pressure

Gold prices had been calm all week but of course not unchanged. From the open Sunday evening, through the start of Friday’s session in Asian markets we saw a steady slide from $1250 to $1240/oz. My take: lacking any real catalyst for precious metals pricing, traders have spent the week going about the usual process of balancing books for year-end. This would certainly include at least some profit-taking on gold, more so than adding to positions. I think this was the source of the light pressure applied to gold-spot all week.

Things picked up a little bit during Friday’s European session, as a slew of disappointing PMI reads were released from major EU economies as well as the Euro Zone as a whole. Combined with yesterday’s slightly negative tone from the ECB, both the Euro and the Pound collapsed close to lows for the week. The US greenback caught a strong bid on these movies and gold finally crossed back below $1240, setting the table for this morning’s brief sell-off.

And so, Tarantino-like, we return to today’s trading. Over the course of working on this piece, I’ve watched gold recover from this morning’s depths of near-$1233; rising back as high at $1239+, it seems we’ll go into the weekend with a classic example of yesterday’s support ($1240) becoming today’s resistance. I suspect we’ll see a tight $1235-40 range to close the week before starting again next week.

Ahead Next Week

Speaking of, next week is another light-ish lineup this time revolving around a single major event in the FOMC’s December meeting and possibly the last rate hike we’ll see before the summer. We’ll also be keeping an eye on the developing possibility of a possible partial government shutdown that will begin on Thursday if a deal isn’t reached.

Until then, enjoy your weekend, traders. I’ll see you back here on Monday.