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.

The news flow and economic data has been just about as thin as we anticipated to being the week. As such, we’ve mostly watched the market’s mob attempt to figure out if the near- to medium-term outlook for the world’s largest economy is bright or gloomy given all the uncertainty in play.

Here, at the end of the week, while beats of optimism mid-week had allowed prices to make weekly highs, gold spot prices have reverted to the muted positions from which it started on Sunday evening. At the time of writing, the yellow metal has slowed it’s decent from earlier in the morning, but is still searching for support to lift back above $1900/oz.

With next week’s market environment likely to be much the same, a failure by gold to regain that key level before market close could result in some strong technical selling when markets reopen on Sunday/Monday.

So, what kind of week has it been?

Monday: Gloomy Market Mood Turned Major Assets Red, but Gold Prices Continued to Reflect Stronger Support at $1900/oz

Our outlook was for a week mostly empty of big economic news, and probably just as little in terms of momentous headlines that would jolt the market; Monday, at least, lived up to those meager expectations. With no pertinent economic data points on order, it was also a pretty slows news day with the only “new” reports bringing us the same vague suggestions that stimulus talks are ongoing without anything in the way of concrete progress. Are we very tired yet?

For lack of anything else to pay attention to, the markets’ focus seemed pulled to the mounting evidence, small and large, that the US economy is posed to roll backwards into recession (and maybe crisis) without a considerable fiscal stimulus package—and, at this late hour, probably even with one. Despite overnight trading hours seeing a lift in equity prices on faint hopes of a fiscal boost to the world’s largest economy, the US session had a decidedly risk-off mood. This was reflected by nearly every major asset class losing points on the day: US stock markets were broadly lower, and gold prices pared back most of Sunday night’s gains falling to support just above $1900. Even still, the US Dollar was also down on Monday, as were US Treasury prices and oil.

Tuesday: Precious Metals Prices Took Advantage of a Beneficial Environment as Gold Regained $1920/oz, Silver $25/oz

The tone and mood of financial markets continued to be thoroughly mixed on Tuesday, but the action for gold was decidedly more positive. The near-term outlook for US economic growth remained muddy, but out of Washington both sides of the (so far) do-nothing stimulus negotiations manufactured louder drumbeats of progress. By the time Speaker Nancy Pelosi softened her previous stance that Tuesday would be a deadline for a deal, US equities had already latched on to the new alibis for optimism: while not exactly “rallying,” the major stock benchmarks moved higher on the day.

The US Dollar Index fell on Tuesday as well, with managers exiting some cash positions in preference of risk. The most notable move, even looking back from today, was a steeper sell-off in US Treasuries that eventually pushed the 10-year’s yield to four-month highs; For the first time in a quite a while, an instrument other than equity prices appeared to be pricing in some near- to medium-term optimism for the US economy.

We’re still heading into arguably the most contentious US election in modern history, though; With uncertainty still very present in the minds of the markets, given more room, gold prices ran. The yellow metal rose steadily through Tuesday’s US session to regain $1910/oz and, after some choppy trading around the global markets close/open, would continue higher in the first hours of Wednesday business in Asia, picking up another $10/oz or so in consistent trading through the overseas market hours. Rising in tandem, silver spot prices climbed back above $25/oz.

Wednesday: Precious Metals Prices Held High on a Slow News Day

Moving into midweek trading, global equities continued their somewhat directionless into the start of the US session. Bond markets did not reflect the same sluggishness though, as the surge in yields continued. Falling bond prices, a still-weakening US Dollar and even an opening pop in US stock markets added extra tailwinds to gold which boosted the yellow metal to a weekly high of $1930/oz (spot) shortly after cash trading began in New York.

The increasingly louder shuffle of election news dominated Wednesday’s news cycle for the lack of really any other options; Washington’s negotiations around (but seeming never toward) a stimulus package remained in a standstill. Amid the din of new poll numbers and carnival barking from both campaigns, US stocks would ultimately fall on the day. To some degree the pullback would have been due to Tuesday’s ephemeral optimism about a rescue deal getting done wearing off, but the benchmark indices were particularly hit by falling energy shares; oil prices at the same time fell to recent lows around $40/barrel.

Gold prices managed to hold on to a majority of their overnight gains throughout the US session, but were pressed off the top by a weakening in the overall commodities complex (led by oil,) as well as what we have to assume is some measure of profit taking off the highs. Precious metals trading closed Wednesday’s book of business near $1925/oz for gold, and $25/oz for silver.

Thursday: Gold and Silver Prices Slid Sharply as the Dollar Returned to Prominence and UST Yields Rose

As trading reopened for the Thursday session in Asia, reassessments of the chances for a meaningful rescue package for the US economy in the near-term came back negative. Asian equity indices began a moderate slide that would spread through big parts of Europe as well, under pressure from the pullback in economic optimism and a move higher in coronavirus infection rates. For the first time in several days, the US Dollar would return to its throne as the most in-demand safe haven asset, allowing the Greenback to start a climb from what had been multi-week lows. The shift in the dynamics of key safe havens still saw gold prices holding near $1920/oz through the first half of European trading hours.

The hold didn’t last, however, as the Dollar’s rally picked up considerable speed ahead of the US market open. Prior to Thursday’s US data releases most key assets seemed to be getting pushed lower in favor of USD positions. We saw a sharp burst of selling in US Treasury markets with the 10-year’s yield now pushing towards 0.85%-- whether that was reflective of a rush into Dollar positions, or a mildly optimistic play for post-election US outlooks is unclear. Regardless, gold prices sank like a stone, plummeting to $1905/oz in the spot market; it was a return to a dynamic we had grown accustomed to post-GFC: gold value taking a loss in favor of potential positive yields on US Treasury debt.

The medium- to longer-term US outlook got an added boost on Thursday morning, as Initial Jobless Claims for a new week not only fell below expectations, but reported a considerable revision to the prior week’s more concerning metrics.

BREAKING: The number of Americans filing for unemployment benefits fell for the third time in four weeks. U.S. jobless claims were 787,000 in the week ended Oct. 17 https://t.co/JHxeZtocwd

— Bloomberg Economics (@economics) October 22, 2020

Whether the novel rise in Treasury yields will start pressing a consistent headwind against gains in the gold market, we’ll have to wait longer to find out. It’s worth mentioning though, that later in the same trading day yields would take a few smaller steps higher but gold spot prices maintained steady support above $1900/oz. US stocks were in the green at the end of the day, lifted by strengthening shares in the financial sector, and gold prices appeared to re-consolidate around $1905, however briefly.

Friday: Gold Prices Have Broken Support as the Market Appears Tired Heading into the Weekend

Whether as a result of some measure of market exhaustion and/or disinterest following a mostly dull week, or Thursday evening’s US presidential campaign debate, or rising Covid-19 resurgence in major populations around the world, financial markets have been in a gloomy mood to wrap up the week. Overseas equities markets were mixed with a slight tendency to rise higher on positive earnings headlines this week, but the US indices are shaded back into the red at the time of writing, mid-Friday morning.

Gold and silver prices are pushing lower as well, having busted below support at $1900 and $24.75/oz, respectively. There doesn’t seem to be any clear motivation for the sell-off in metals, as the US Dollar is having a weak go as well. Profit-taking is always a possible motivator ahead of the weekend, or else it may just be an increasing number of investors, unsure of what’s to come in the next few weeks between US economic rescue talks, pivotal federal elections, and resurgent coronavirus hotspots; out of caution those investors and managers may just be taking their money off the table until things become more clear. In that position, metals are always an easy option to liquidate and such moves can way on the spot markets.

Next Up

Next week’s economic calendar will have just slightly more going on than what’s just passed, with an update on the Fed’s inflation metrics coming on Friday. We’ll also be moving into to the FOMC quiet period, wrapping up the tenth trading month of the year, and enduring the final full week before the US presidential elections.

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.