GoldPrice.

Happy Friday, traders. With a long weekend ahead that I’m sure you’re all anxious to get to, I’ll do my best to keep our rundown (useful, but) brief.

So, what kind of week has it been?

Fed Speak This Week

Most of the attention we could muster for Fed Speak this week was focused on two of the committee’s most reliable hawks—Cleveland Fed President Loretta Mester and Kansas City Fed President Esther George—who had taken a slightly more dovish bent as 2018 ended, both (publicly, at least) supporting the Fed’s pause on rate hikes.

After reverting a little more to type last week, President Mester appeared more the moderate once again in her Tuesday remarks notably saying that she feels we’re approaching neutral rates, while acknowledging that the FOMC will spend time at “coming meetings” forming a strategy for the end of balance sheet normalization. (Whether that would be a more abrupt end than most market participants foresaw prior to the committee’s December rate hike, we’re unclear.)

Fed's Mester remarks on balance sheet runoff, normalisation https://t.co/lTcXzxpsBt

— ForexLive (@ForexLive) February 12, 2019

Meanwhile, the Kansas City Federal Reserve’s President George joined Mester in voicing support for the pause, primarily because it provides the FOMC with the opportunity to take a more accurate measurement of how 2018’s rate hikes are impacting the American economy.

?? #Fed's George says she backed pausing rate hikes in order to assess impact - Reutershttps://t.co/wXgbMyRNrS

— Christophe Barraud? (@C_Barraud) February 13, 2019

It’s tough to say with specificity whether Fed Speak this week was primarily positive for gold prices or negative. The ushering in of a cycle of rate cuts should ultimately be a major tailwind for yellow metal, but it’s not clear yet how near or far that paradigm shift might be.

Uninspiring Inflation, Initial Jobless Claims

On a meager slate of pure macroeconomic data releases for the US economy this week the top card was the most recent assessments of inflation—primarily the CPI report and, to a lesser extent, PPI. The Consumer Price Inflation report was delivered more or less bang on with market expectations, as the headline number fell to 1.6% while the core (ex-foot and -energy) of inflation once again shows a 2.2% increase year-over-year.

US: January CPI: Weak energy, steady core - TD Securities https://t.co/MRbDQKzEpj #Inflation #CPI #Banks

— FXStreet News (@FXstreetNews) February 13, 2019

Headline inflation’s drop farther away from the Fed’s 2% mandate is not particularly alarming in this occasion, as it can for the most part be attributed to suppressed energy prices. On the other hand, over the last year core inflation has stalled out at 2.2%, which I believe is a contributor to the FOMC’s current decision pause on rate hikes.

In less optimistic news for US economic growth, Producer Price Inflation missed on what was already expected to be a near-zero number, printing in negative territory once again and providing a boost to gold prices and amplifying the buying impulse created by another miss to the upside on Initial Jobless Claims, a number that is becoming an increasingly disappointing gage of the labor market in the US.

Retail Runs into the Holiday Blues

Also on Thursday morning, the Retail Sales report for December turned out to be the biggest surprise on the week’s US economic calendar—and not in a good way. Disappointing from consensus expectations of a near-flat increase in sales, Retail for the month of December (the one that has Christmas in it) decreased compared to the month prior. The report’s -1.2% pullback is the worst month-over-month change over the last nine years.

Worst retail sales drop in 9 years is 'every bit as bad as it looks' https://t.co/NytoUPREhz by @emily_mcck pic.twitter.com/338yWnpCZP

— Yahoo Finance (@YahooFinance) February 14, 2019

Now, there are some odd seasonal and/or “transitory” factors that feed into this: namely, that Thanksgiving and Black Friday, forever boons to retail sales, fell a bit earlier in the month of November this year which serves to dilute the December read to some degree. That said: man, what a disappointing number. Currency and gold markets felt the same about the release, and this 8:30am tag-team of negative jobless claims and retail data served as the catalyst for a late-week surge in gold prices that we’re well into this afternoon.

Gold’s Late-Week Resurgence

Today we’ve gotten a mixed bag economic data and some mostly inert updates on our major macroeconomic narratives, set at the backdrop to a reinvigorated spot market for gold. Better than expected turns from both the New York Empire Sate Mfg. Index (for February) and the University of Michigan’s analysis of consumer sentiment (also for February) were overshadowed by the negative impulse implied by a contractionary month-over-month Industrial Production report for the month of January.

U.S. manufacturing production unexpectedly contracts in January https://t.co/r5xXKvZqDN pic.twitter.com/8VXlVqFzy8

— Bloomberg Markets (@markets) February 15, 2019

Providing a dull background of white noise to this morning’s trading (and I cannot stress how appropriate I feel like the words “dull” and “noise” are in describing the actors in these little dramas,) was word that late-hour trade talks between the US and China are going well ahead of the March 1^st deadline (“but who knows what that means.”) so there’s optimism to be found for the wider global economy in the news but just how much remains to be seen. And in better news for the US Dollar, the president announced he would be signing congress’s bill to fund the government and avoid another federal shutdown. As we were told yesterday afternoon to expect, any strong support for the Greenback was immediately mitigated by the president confirming he will also invoke a state of “national emergency” in an attempt to further fund his border wall.

The coming legal fight over this move is likely to be tedious and slow. While I’m just about the first thing from an expert on this (or any) legal warfare, I do think it will serve to stagnate US Dollar momentum over the remainder of this quarter; that view is reflected in gold’s price action today. At time of writing, our shiny yellow metal is retesting what looks like strong resistance at the $1320/oz level heading into the long holiday weekend.

Speaking of which, after an extra day off on Monday (our Weekly Gold Preview will be delivered on Tuesday) we’ll spend the week examining Wednesday’s release of the minutes from the FOMC’s shockingly dovish January meeting, as well as Durable Goods data for December and another round of Fed Speak. I anticipate this “emergency” argument will be slow to get rolling (in terms of if and how it will factor into currency and metals markets,) so my main narrative focus will be on the continuance of trade negotiations between the US and China (this time taking place in DC) and the assessment of whether they can strike a deal or, at the very least, postpone the deadline lying at the end of this month.

Let’s set all that down for the week though, traders, and do our very best to milk a long holiday weekend. Deep breath. Exhale. Let the stress out. Let the whisky in.

I’ll see you all on Tuesday.