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.
Here’s what you need to know:
Gold logged its second straight weekly loss, retreating below $3,900/oz before rebounding to hold $4,000/oz support.
The Federal Reserve cut rates by 0.25%, but the move was widely expected and failed to ignite a major rally.
Markets remained cautious amid the ongoing U.S. government shutdown and muted economic data releases.
Central bank gold buying offered late-week support, helping stabilize sentiment.
Gold prices are looking at a second consecutive loss week over week, following nearly ten weeks of gains. While it’s bled a great deal of monetary value out of the metal market to end October, it’s also presented the market with proof that there remains support at key levels. And the yellow metal has shown strong indications that this is the case.
With the U.S. government shutdown now having run through the length of October and still showing no viable signs of ending, the main focus across all major asset classes tied to the U.S. dollar was Wednesday’s FOMC meeting. In advance of the announcement that was generally seen as a foregone conclusion, gold prices sold off sharply to start the week. To some extent, we expect this was a sign of some pre-FOMC jitters where investors and traders who held already profitable long positions in gold decided to lock in profits in case Jerome Powell & Co. broke away from the base case. But it was likely more directly an effect of trade tensions between the U.S. and China, having warmed over the weekend ahead of a summit in South Korea between the leaders of the world’s two largest economies.
The steepest slides for gold prices came on either side of Monday’s U.S. trading hours, in the early morning and then on Monday evening. The precious metal initially found and held solid support at the key level of $4000/oz throughout the New York session, and then dropped precipitously again as the Asian traders stepped to the fore. Here, gold spot fell as far as $3905/oz, the nadir of the week.
On Wednesday, the Federal Reserve delivered as expected and announced a cut to overnight borrowing rates of -0.25%, the second cut in a row and just the second this year. Gold prices had recovered to within touching distance of $4000 by this point, but given how thoroughly the expectation for this rate cut had taken hold, financial markets en masse yawned at the news, and gold failed to provide the surge that we were looking for, given the added headroom after Monday’s sell-off. This may, in some ways, be a result of Fed Chair Powell making an effort to underline that a third successive cut in December is not a certainty and to generally take a slightly hawkish tone.
