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 into the future.
Gold prices are trading steady on Friday after a midweek tip and a Thursday rally that looks set to ultimately hand gold a pickup of 4% in Q2 of 2024, its third quarterly gain in a row.
So, what kind of week has it been?
With a relatively light slate of macroeconomic data reporting at the end of June, gold had a fairly mild week of trading despite some expectations of volatility with this being the final trading week of Q2 2024 as well. A trading range of roughly $30/oz in the spot market is nothing to disregard; but, even so, the yellow metal only showed signs of life from traders on Wednesday and Thursday.
After mild Monday and Tuesday sessions in the US as well as global market hours, spot prices sat at (or just below) $2320/oz as Asian markets spun up for Wednesday trading. Early on in this session, the attention of global investors was taken hold of by a developing story—although certainly not a “new” one—that we may do well to pay more attention to over the summer: the US Dollar hit a 38-year high vs. the Japanese Yen, as Tokyo’s currency continues to dip and lead traders and analysts to speculate about near-term intervention from the Bank of Japan. More than any real concern about a Yen-centric boon to the global economy (although, never say “never”), gold prices were suppressed lower by Greenback’s aggressive climb. For a time, it looked as though the chart might threaten recent support at the $2300 level with a few forays lower, but by the start of New York’s midweek session, buyers had once again stepped in to support gold and the bid/ask spread for spot held steady alongside that key psychological number through the US hours and the Thursday overnights.
In the US morning, the waning gold chart provided an unexpected tailwind from what we likely would have written off on Monday as relatively minor data reports for the yellow metal in the form of the latest Durable Goods report at the 3rd calculation (second revision) of the US’ Q1 GDP growth rate. For Durable Goods, while the new number for May moderately outperformed expectations, the prior month’s read was revised lower by as much as 60% of the original print. Also, a deeper look into the May numbers suggests that the only reason for the beat vs. projections was a large uptick in “defense aircraft,” which is not likely to have been driven by the US consumer. Analysis of new orders for durable goods also fell considerably. Layered within the Commerce Department’s updated Q1 GDP calculations, there were also strong signals that consumer spending in the US has been meaningfully slowed in 2024.
These inputs amounted to a signal greater than the sum of their parts on Thursday, one that investors seem to feel adds to the argument that the FOMC needs to seriously consider moving to cut rates earlier than expected in order to avoid a recession if the US consumers continue to pullback in spending. As a result, gold prices rallied in the first hours of US trading, regaining its position near $2330/oz before lunchtime. On Friday, the print on the PCE Price Index for May—the FOMC’s “preferred” metric for US inflation—delivered the key numbers in line with the market consensus. While this hasn’t lent any kind of upward momentum to gold, it does seem to be providing useful support to Thursday’s gains, even as Fed officials have made a case for new data as an argument that their work to keep monetary conditions tight must continue.
Next week, the first trading days of 2024’s back-half will be interrupted by the July 4th holiday in the US, and as a result, will likely be sparsely attended. Gold prices will hope to consolidate in a period of lower volatility. That said, next Friday morning could prove to be a bracing one, as the first item out of the gates after a holiday—again, on a day that may have lower than usual market depth—will be the June Jobs Report.
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 next week for another market recap.
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