GoldPrice.

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.

Accelerated by a favorable update on consumer inflation data in the US, market expectations for earlier and more aggressive interest rate cuts from the FOMC have consolidated in investors’ projections, and gold prices, as a result, have surged again, poised to close the week at or near to all-time highs.

So, What Kind of a Week Has it Been?

For all the importance that would be attributed to gold closing the trading week at all-time highs, we actually got there first on Monday. Starting the US trading week at roughly $2440/oz, the yellow metal went on to move sharply but steadily higher throughout the entire session, moving beyond $2460 by the commodities markets’ close and then peaking at a new high above $2475 in the second half of Asia’s Tuesday hours. European traders would grab some profits off the top, but only enough to push spot prices into a still eye-watering band between $2465-70/oz, within which the metal traded until Wednesday morning. Importantly, what appeared to drive this aggressive jump-start for gold was a dramatic repricing of not just expectations for an earlier rate cut by the Fed but of the possibility of an “emergency cut” of 0.50% in September (double the “typical” increment) in order to juice economic growth.

The pivot point was, as anticipated, Wednesday’s Consumer Price Index update, which reported a modest (but not insignificant) decline in “core inflation” on an annualized basis. Crucially for the kind of headlines that often drive market sentiment and trade volatility, the overall year-over-year inflation number also slowed by 0.1%, but this moved the top-line number below 3%— a major psychological level— for the first time since mid-2021. Broadly speaking, this presents an argument for the Fed to move closer to cutting rates as inflation (the reason for having hiked rates in the first place) moves closer to the “target” of 2%. Gold prices had been bid higher to $2475 just prior to the CPI report; with the inflation numbers proving those bets to be correct, spot held along that level. However, as trading ramped up for the US’ Wednesday session, we saw an unexpectedly sharp fall in gold of $10/oz initial; from there, the yellow metal fell throughout the day in an inverse replay of Monday’s rally before support stepped in and the end-of-day chart steadied just below $2440.

The reason for this sell-off turned out to be the recalibration of the “Fed Futures” positions traders and managers had taken to start the week. At the end of the day on Monday, markets had priced at a greater than 50% likelihood that the FOMC would cut by 50 basis points in September, following Wednesday’s inflation data, which had fallen to just below 45%. The precious metal made some early Thursday efforts to rally, reaching back to $2450, but faced another aggressive headwind after a robust Retail Sales report kicked to a resurgent US dollar and rallying Treasury yields. Under pressure, gold briefly dropped below $2440 in a sharp, volatile move but was able to ride a quick rebound back to $2460/oz.

The US dollar rally has turned out to be short-lived and ineffective in the face of the Greenback’s recent weakness. On Friday, the US dollar Index retreated and now has slipped beyond a 6-month low point, and markets appear to be digging farther into their expectations for an interest rate cut in September, even if it is “only” -0.25%. Gold prices have been the flashiest beneficiary of this swing; the yellow metal initially surged to all-time highs above $2495/oz before apparent (and not unexpected) resistance was met close to $2500. Prices have rolled back to $2485 but appear to be consolidating.

Next week will be crucial for all of this market positioning and trading that has crafted its mechanics around the FOMC’s next move. Even without much in the way of key economic data, we will get two major inputs from the Federal Reserve itself: first, on Wednesday, the release of the discussion notes from August’s somewhat dovish FOMC meeting; then the opening of the annual Jackson Hole Symposium, kicked off by the keynote address from Fed Chair Jerome Powell on Friday.

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.