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 other key correlated assets— and may continue to in the future.
Gold prices on Friday morning are making an effort to hold onto and consolidate gains above the record level of $2800/oz at the tail end of a volatile week of trading.
Independent of how the yellow metal would trade in the following days, Monday was as ugly a moment for gold pricing as it was for many other major asset classes. The tech sector-led collapse in two of the three key US stock market indexes turned most financial media coverage for the day into a sea of red. With traders and portfolio managers around the globe being pushed to make margin requirements, gold positions were the first opportunity for relief for many. The heavy liquidation of gold positions for cash weighed greatly on the metal’s pricing, dropping bids from the opening line at $2765 to a weekly trough of $2730/oz.
Despite the rough start, and even with a generally accepted presumption that the FOMC would not deliver another consecutive rate cut this week, there was little concern that Monday’s slide presaged a whole week of ugly losses for gold. This is because the market still expected that a key driver of valuations across all assets— but particularly the US Dollar and its Treasury paper— would be reactions to a continuing stream of announcements and actions taken by the new US administration in its second week. The estimation turned out to be true, and the consistent thrum of global economic uncertainty created by the Trump White House allowed gold to rebound slightly Monday afternoon and then hold a steady level at $2740/oz through Tuesday and Wednesday morning’s pre-FOMC trading.
The FOMC did broadly deliver as expected, although what was a generally hawkish tone, objectively speaking, to the committee’s decision and statement was parsed to pieces by inversions and traders and ultimately spun into a modest tailwind for gold. The Fed announced no change to policy rates, standing pat for the first time in three meetings. Crucially, the committee’s statement highlighted a rosier view of the current labor market (removing what would be a point of pressure to ease further) and removed a remark about making “progress” towards the Fed’s mandated inflation target (underlining stubbornness if not a risk of resurgence, in inflation pressures.) In a vacuum, we would have expected this to be another strike against gold’s recent surge to record highs as it pushes farther away the probability of the FOMC deciding to make more than the two rate cuts it currently projects for 2025.
Story Continues
However, Fed Chairman Powell, in his usual post-meeting Q&A, highlighted the market’s uncertainty about Washington’s near-term changes to economic policy— particularly tariffs— and their potential impact in the US and around the globe. At the same time, on Wednesday afternoon, the market evidenced that investors, too, are concerned about this risk above all else. This started up another strong flow away from US Dollar positions, with gold being a prime beneficiary of the risk-off swing, rising to $2775 and near new all-time highs late Wednesday.
The selling of US Dollars and the flush of bids into new or growing gold positions really accelerated on Thursday, post-FOMC, with Asian markets carrying gold spot to new highs above $2790 and the earliest hours of US trading carried the yellow metal to the doorstep of $2800/oz. Friday’s trading has seen spot breach that major psychological threshold, but as we start to look towards next week it’s at this lofty level that gold’s buyers seem to have thinned out. Challenges to gold’s positive repricing will come next week in the form of updated ISM Surveys and the January Jobs Report on Friday. Public commentary from Fed officials is also expected to be a major player in tandem with continuing reporting and announcements out of Washington.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I’ll see you back here next week for another market recap.
