24th August - Gold Completes 5th Straight Week Of Gains
In terms of geopolitics, the weekend was a quiet one, with no significant developments to report from the Middle East. Trump's "economic D-Day" threat against Iran still lacks any real detail, and oil finished last week close to its highs as a result, with the market seemingly settled on the view that this conflict has a while left to run and that the Strait of Hormuz is not reopening any time soon. In the absence of anything new, that leaves us with a market that spent all of last week reacting to two things, the bond market and the data, and is now positioning itself for a significant week ahead.
Last week's story was the US Treasury's decision to double its buybacks of long-dated debt, from $2 billion to at least $4 billion per operation, and the market's reaction to it. Wednesday's relief lasted precisely one session before yields reversed and the sticking plaster fell off, which told us everything we needed to know about how little confidence there currently is in US debt. Bessent has since doubled down, and also discussed currency interventions involving the yen and peso alongside new fiscal consolidation plans. Yields ended the week stabilising near their long-term highs rather than retreating, so nothing has actually been resolved. The Treasury is still trying to suppress borrowing costs while the Fed wants tighter financial conditions to do its work for it, and those two aims remain in direct conflict.
What makes last week genuinely notable, though, is that what data releases we did have were strong for the US. The Philadelphia Fed manufacturing index jumped to 47.4, its highest since April 2021 and hugely above the 24.3 expected. Jobless claims fell to 206,000, so layoffs remain very limited. And on Friday, US business activity grew at its fastest pace in more than four years. Three separate strong prints, whilst not key data points individually, added up to a good week of data, but none of them managed to lift the dollar or slow the metals. For me, that is a key observation of the week. When good economic news no longer moves US assets in the direction it should, the market has stopped pricing the US economy and started pricing something else entirely.
Forex
The dollar had a mixed end to the week and the weekend has been almost completely flat. That stillness is a market waiting rather than a market at rest, and I would not read much into it.
The AUD was the standout on Friday, gaining 0.80% to 0.7169 and rising around 0.76% against the JPY. That is the cleanest currency expression of the metals move, given Australia's position as a significant gold producer, and it was helped along by the strong global activity data. The euro was the weakest of the majors on the day, with sterling regaining some ground on the cross after several sessions of losing it, EUR/GBP falling around 0.25% to roughly 0.8560. The franc gave back a little more of its Wednesday surge, which increasingly looks like it was a one-day repositioning rather than a genuine regime change.
The interesting one for me this week is the dollar itself. It has now fallen on rising yields and on falling yields, which tells you the market is not trading rate differentials at all, it is trading the credibility of the issuer. Warsh speaks at Jackson Hole on Friday, and with the Treasury actively working against the Fed's preferred path, whatever he says about that tension is likely to matter more than anything he says about rates.
Indices
Friday was a solid rebound, with the Dow gaining 0.85% to 53,225, the S&P rising 0.23% to 7,670 and the Nasdaq also up 0.50% to 26,180, halting a five-day losing run for the Nasdaq 100. Goldman Sachs led the gains, up 3.94%, followed by Merck and Salesforce.
It is worth keeping that in perspective, though, because all three indices still finished the week lower, the first weekly decline since late July. The cause was the bond selloff rather than anything wrong with the earnings, which have generally been strong. Walmart's guidance miss on Thursday was the exception, and as a read on the US consumer it did real damage to sentiment.
Everything now points to Wednesday when Nvidia reports earnings, and it does so after five sessions of semiconductor weakness and with the AI capex question still unresolved. We have had contradictory signals for weeks, with Cisco warning that AI demand was not there while Anthropic posted $11.5 billion in quarterly revenue. Nvidia is the company best placed to settle that argument, and its results land on the same day as PCE. If both come in the same direction, we could see a significant move.
Precious Metals
Gold and silver had another very strong week and the move is now genuinely parabolic. Gold rose 1.85% on Friday to close around $4,600, and has pushed on again this morning to trade near $4,640, having touched $4,655 overnight. Silver rose 1.18% to close around $69 and touched $70 for the first time on Friday.
The context matters. Gold has now posted a fifth consecutive weekly gain, up nearly 5% last week, which is its longest winning streak since October 2025. From Wednesday's low, gold is up roughly 8% and silver roughly 12%. And as I noted above, all of this happened during a week of strong US data, which is the clearest possible evidence that this is a confidence trade rather than a rate trade.
I do want to flag the risk, though, because I have been patient with this move for a year and I am not about to become reckless with it now. A rally this fast, this far, heading into a week containing PCE on Wednesday and Warsh at Jackson Hole on Friday, is carrying a lot of event risk. Silver failing at $70 and slipping back this morning is the first sign of resistance at a big round number. If PCE comes in hot and Warsh sounds hawkish, we could get the pullback that has eluded us for a fortnight. My medium-term view has not changed at all, and I still think this is the trade to be in for the rest of 2026 and beyond, but I would be very wary of chasing it at these levels three days before two major catalysts.
This Week's Market Drivers
Jackson Hole Symposium, Thursday through Saturday – The Fed's annual gathering, and the venue for whatever the central bank wants to signal about its path from here.
USD Fed Chairman Warsh Speaks, Friday – The main event of the week. With the Treasury actively suppressing yields while the Fed wants tighter conditions, what Warsh says about that institutional conflict may matter more than anything he says about rates.
USD Treasury Secretary Bessent Speaks, 7pm UK time Today – With the Treasury having doubled its bond buybacks last week and yields refusing to stay down, anything Bessent says about the buyback programme or currency intervention will move the dollar and the long end.
AUD CPI, 2:30am UK time Wednesday – Headline inflation is forecast to fall sharply to 3.3% from 3.8%, and is the key release for the AUD and for the RBA's hiking bias.
USD Core PCE Price Index, Wednesday – The Fed's preferred inflation gauge, forecast at 0.2% monthly against 0.1% previously, and the single most important data release of the week for both the dollar and the metals.
USD Preliminary GDP, Wednesday – Released alongside PCE and forecast to hold at 1.5%, giving us a read on whether the economy is genuinely slowing beneath the strong survey data we saw last week.
CAD GDP, Friday – Forecast at 0.2% against 0.3%, and worth watching given the CAD has been outperforming on both oil strength and the tariff pause.
USD Preliminary Benchmark Payrolls Revision, Friday – Easy to overlook, but the previous revision was a staggering -911K, and another large downward adjustment would seriously undermine confidence in the labour data the Fed is relying on.
Comments