Weekly update

Gold fell 1.8% last week and is now down for a third consecutive week, suggesting that momentum continues to fade following the powerful surge we saw in August. On Friday, the precious metal initially fell in reaction to the US CPI data but then rallied sharply from its lows immediately afterwards in a classic “sell the news” reaction, before fading into the close. Ultimately, gold finished Friday’s session 0.7% higher.

The S&P 500 fell on Friday to post a flat close on the week. Rising yields and elevated oil prices reminded investors that the macro backdrop is turning challenging. Friday’s US jobs report raised the pressure on the Fed to hike as the report was considerably stronger than expected. All the attention will be on inflation data in this shortened week for US investors, plus the usual suspects of oil and bond yields, ahead of the FOMC rate decision in the following week.

Last week’s main theme has been a shift away from the US dollar towards currencies of economies with stronger fiscal positions and lower debt levels. The brief rally in long-dated US Treasuries helped fuel gains in gold and silver, while the Swiss franc also benefited from increased haven demand. The euro has performed reasonably well too, with the Eurozone economy continuing to expand modestly despite geopolitical uncertainty and higher energy prices.

AUD/USD grinds higher into Australian jobs data as RBA-Fed expectations remain finely balanced and the US dollar holds support.

Bond yields pushed higher again on Friday as the consolidation near the upper end of the recent range continued, mirroring the price action of oil prices, posing threat to the gold recovery attempt.

Gold managed to bounce a bit on Friday, although it was too little to prevent a weekly decline. On the week, the metal fell 2.5%, making its second consecutive weekly decline. Though gold again managed to hold its own above the key $4,000 level on a daily and weekly closing basis, the metal was now flat on the month.

The EUR/USD reversed earlier gains to close lower on Friday after the earlier optimism about the Strait of Hormuz re-opening failed to keep the dollar and crude oil under sustained pressure. While crude oil fell about 9% on the day, it closed well off its earlier lows.