GoldPrice.

Happy Thursday, traders. Welcome to our weekly market wrap, where we take a look back at these last four 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 closing out a steadily progressive week in which the yellow metal rode a tailwind from still-elevated inflation numbers to gain more than $20/oz from Sunday night’s market open. Gold continues to demonstrate that the support it derives as a traditional hedge against inflation is consistently stronger than any concerns about the metal’s value in in a higher-rate environment as the Fed plans to continue tightening monetary policy.

So, what kind of week has it been?

Well, aside from a jump in the immediate reaction to Tuesday’s inflation data, and the drag we’re seeing applied to gold prices on Thursday as Treasury yields ride a somewhat unexpected rally higher, it’s been a mostly mild trading week for the yellow metal with most of the hallmarks of a holiday-shortened trading week: slow news flow (headlines from Eastern Europe being the obvious exception,) relatively light trading, and little momentum, as traders and money managers just try to keep from blowing things up so that everyone can enjoy a decent long weekend. As a result, here you’ll find another short-week indicator: There’s not all that much to cover in a market wrap. Before turning you loose for the holiday weekend though, let’s touch briefly on some of the US economic data we saw this week.

CPI Inflation Suggests a Possible Inflation Peak

Investors were clearly nervous about how the inflation data for March would look. Monday’s marketplace was all red, with US equity indexes taking easily their biggest losses of the week as Treasuries continued to fall, pushing yields higher. The benchmark US 10-year yield rose as high as 2.8% on Monday with investors fearing more sticker-shock to come from Tuesday’s numbers, and the pinch on economic growth that could be created by inflation persisting near 40-year highs and by the Fed’s efforts to fight it. Gold prices were steady through the day and leading up to the CPI release, even if the chart traded relatively flat to Monday morning’s opening bids.

And while the CPI number released on Tuesday are certainly “up there”—headline inflation rose +8.5% year-over-year, the highest rate since 1981—there were some green shoots of improvement, and markets appeared willing to lean into the reads from several experts and economists that March will represent the “peak” in this inflation cycle as they morning went on. In the immediate aftermath, however, gold prices shot higher as investors reacted to the headline number again rising above the recent 40-year highs, topping out near $1975/oz in the initial rallies. US stocks initially made gains on the day, before an afternoon slump led to the major indexes finishing just slightly in the red.

A look just past the headline number does support some optimistic takes. The month-to-month core inflation no only slowed from February’s pace, but came in below expectations for the first time since last summer. This suggests that, stripped of the most volatile categories that are food and fuel costs, the pace of inflation shows significant signs of cooling one month into the Fed’s new hiking cycle. The more granular looks at inflation by category is a mixed bag: the relatively sharp decline in used car prices is getting coverage because that was such a driver (no pun intended) of US inflation last year; services that are particularly sensitive to fuel costs, like air travel, are considerably higher-cost; apparel price inflation increased moderately while restaurant prices decelerated.

So, as is often the case, when inflation isn’t at multi-decade highs, there’s something in the March CPI report for all of the market’s idealists and pessimists. On net, this seems to leave the Federal Reserve in a position to carry on as they have been. Inflation obviously remains high, and it would be a stretch to say these updated CPI numbers suggest that the central bank’s first hike and forward guidance towards a (presumed) +0.50% hike in May is already turning the tide. But it does leave room to believe that the Fed might be getting the car back under control, and that optimism might allow equities to endure the first phase of rate hikes without turning sharply downward into a bear market.

Gold meanwhile, still maintains strong and strengthening demand as a hedge against inflation in spite of the expectation that the Fed will continue aggressively raising rates to combat detrimental price pressures through the end of 2022 and beyond. Following the initial rally post-CPI, the mild retracement as the market digested the more positive aspects of the report, and then the more stable markets that traded on Wednesday, gold has held on to the majority of the week’s gains after ticking up to $1980—even the slide that the yellow metal took on Thursday morning as Treasury yields unexpectedly surged has mostly unwound, and gold looks set to spend the Easter weekend with solid footing at $1970.

Producer Prices Remain High & Hot

Worth discussing, even if it didn’t appear to have a strong impact on gold prices or any adjacent-trading markets, is the record high Producer Price Index number for March, which printed on Wednesday morning. Reflecting a +11.2% year-over-year increase last month, PPI is the equivalent of CPI metrics for producers—effectively the input prices for goods (and some services) whose prices comprise the monthly CPI report. While there didn’t seem to be any real inclination to walk-back anyone’s “inflation peaked in March” calls, it’s tough to sugar-coat a record high PPI number. (Although core PPI looks more subdued at +7% YoY.) Because is a measure of input prices it’s a forward-looking mark for consumer inflation in the US economy, and this seems like the kind of mid-tier signal that won’t have investors panicking about cost pressures or instability, but may maintain the undercurrent of inflation concerns that has been a component of gold price support.

Jobless Claims Reflect a Tightening Labor Market

Notably, jobless claims appear to have evened out a (relatively) new lows. Even with a moderate pop higher on this week’s read, Initial Jobless Claims remain well below 200K. Assuming the high-frequency labor market data remains tight in this way, it should continue to support the expectations for the Fed to raise rates again in May and at least one more time through the summer (the next BLS Jobs Report will only arrive just after the May FOMC meeting.) Gold prices have continued to hold on to consolidated support even as the case mounts for the US economy to see higher interest rates faster, but it’s unclear for how long the yellow metal and its proponents can stay aloft against that kind of headwind—particular if inflation does begin to flag as a result of the Fed’s efforts.

Next Up

Next week seems like a bit of an unknown for the gold market’s mood and direction; a light data calendar and a Monday holiday in some markets means no focal points for investors to project and pivot around like they had with CPI this week, so the path of markets—not just gold, but equites, the Dollar, and other key components of the commodities basket—will again be subject to the largely unpredictable (but generally negative) newsflow out of the war in Ukraine, and any new signals sent by key FOMC officials ahead of the May meeting and its anticipated double-paced rate hike.

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 on Monday for our preview of the week ahead.