We continue our series about the drivers of the price of gold. In the previous edition of Market Overview, we focused on the somewhat overlooked impact of the bond market on the yellow metal and analyzed the relationship between gold and changes in bond prices, credit spreads, yield curve and the financial sector’s strength. In December we analyze how the very well-known macroeconomic reports: GDP, labor market indicators (e.g. nonfarm payrolls), inflation indicators (e.g. Personal Consumer Expenditures Price Index or Producer Price Index), and reports on consumer activity (such as Personal Income and Outlays and Retail Sales) affect the gold market. These indicators do not always have a direct influence on the price of gold, but they often affect the Fed’s actions and markets expectations on future economic growth, and thus indirectly the gold market.

Given that the gold trade is generally about the Fed’s credibility and confidence in the U.S. economy, the above-mentioned reports may significantly change the precious metals market. Indeed, gold is the most sensitive commodity to macroeconomic announcements, according to the IMF Working Paper “The Effects of Economic News on Commodity Prices: Is Gold Just Another Commodity”. The best example is the October Employment Situation Report, which stood behind the plunge of the shiny metal at the beginning of November. This is why it is worth analyzing the links between economic indicators and the gold market.