Happy Friday, merchants. Welcome to our weekly market summary, where we take a look at these last five days of trading focusing on the market news, economic data and headlines that had the biggest impact on the prices of gold and other key correlated assets, and that may continue to do so in the future.
Here’s what you need to know:
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Gold fell more than 2% this week, snapping an eight-week winning streak amid strong profit-taking.
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ETF outflows and weak trade war headlines weakened buying momentum, pushing gold briefly toward $4,100 an ounce.
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A softer-than-expected CPI report on Friday revived optimism about another Fed rate cut, stabilizing gold above $4,100.
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All eyes are now focused on next week’s FOMC decision, with traders keeping an eye on Powell’s comments for guidance amid the ongoing government shutdown.
Gold prices have pulled back sharply this week, as the recent surge in speculative buying of gold (and other precious metals) appears to have receded, or at least been outweighed by investors looking to lock in profits with gold trading at or near all-time highs. However, the most fundamental attraction for investing in the yellow metal remains stable. Despite a weekly drop of more than 2% and probably the first weekly drop in gold prices in more than two months, the market still shows reliable buyers and support well above $4,000/oz.
The same trade themes have continued to dominate investor and manager attitudes to gold valuations, but with FOMC participants entering a “quiet period” ahead of next week’s meeting and interest rate decision, updates to that narrative have been kept to a minimum. Similarly, until the end of this week, pronouncements and reports on the United States’ various bilateral trade wars have been muted. And what has been reported, particularly regarding the new ad hoc tariffs announced on Chinese imports, has been mild in tone.
As a result, two of the biggest contributors to recent risk-off sentiment in the market – fears of an escalation of the trade war and uncertainty over the Federal Reserve’s next move – cooled this week. Without fresh bullish momentum, gold prices began to decline on Tuesday as traders and money managers moved to take profits. By Wednesday afternoon, driven by significant outflows from gold ETFs, the price of gold had fallen more than $200 an ounce to $4,100, from Monday night’s high of more than $4,375.
At the start of the US session on Friday, gold looked vulnerable, with doubts over whether another round of profit-taking would push prices closer to the $4,000 support level. However, the outlook changed with the long-delayed release of the September CPI report. Inflation accelerated month after month, but less than expected (+3.0% vs. +3.1% expected). The slightly colder reading boosted confidence that the Federal Reserve will cut rates again next week.