Good morning, traders. Welcome back to another week in the metals and currency markets, and to our look at the week’s macroeconomic calendar.
Gold spot price is back above $1500 this morning, trading $1503/oz at time of writing.
After what looked like some strong selling pressure at the start of the European morning, the yellow metal made its initial climb back to $1500 on reports of unrest in Hong Kong escalating as protestors occupied the airport and forced a government halt of flights. The news spooked investors enough to reinvigorate last week’s risk-off momentum and drive safe-haven gold higher. Gold prices had fallen back to support at $1500 as we approached the US session’s open but with US stocks looking weaker at the open we’re also seeing a few more buyers for gold.
It’s also worth mentioning that the USD/CNY fix set another multi-year high above the demarcation line of 7.00. That in itself doesn’t seem to be moving related markets as much as it did last week, but we’ll be keeping an eye on both stories out of Asia this week.
Lastly, with another quiet weak from FOMC members, our dominant story out of the US will be the US-China trade dispute. This was the first morning in maybe weeks that my regular research notes didn’t feature headlines about somebody or something in Washington ratcheting up the tension. That seems, objectively, like a good start; but I also haven’t been able to stop thinking about John Wayne saying, “It’s quiet…too quiet.”
With that nod to The Duke, let’s take a closer look at the calendar this week.
US Economic Data to Watch
Tuesday, August 13 at 8:30am EDT // CPI Inflation (July)
[core CPI consensus expectation: +2.1% YoY // previous: +2.1%]
[headline CPI consensus exp.: +1.7% YoY // prev.: +1.6%]
Having made it through the weekend without any new trade war bombshells, the release of July’s consumer inflation data could be an interesting pivot-point for gold prices; because while the overall consensus among market analysts is for inflation to continue at an unchanged pace, most are acknowledging that the risk is to the upside this time around. If CPI arrives as expected it won’t do anything to increase the odds of an FOMC rate cut in September (which would push gold higher,) and if the inflation numbers outperform that could put some pressure on gold prices while boosting the dollar. If gold prices are still trading below the $1500/oz level on Tuesday morning, that kind of headwind could bring some sustained downward momentum to the chart.
Of course, there’s always the risk that the market is so overly focused on trade tension and stock market performance that any reaction to the inflation data—positive or negative—will be much more muted than usual.
Thursday, August 15 at 8:30am EDT // Retail Sales (July)
[consensus exp.: +0.3% MoM // prev.: +0.4%]
Similar story here, as retail data while normally of some importance will have a hard time turning heads among the much louder macro narratives currently driving the market. That said, analysts expect slight growth driven in large part by another banner year for Amazon Prime Day. Negative effects of the recent trade war escalation aren’t expected to show up until the August report; to me, that suggests that a disappointing number this month might trigger some US Dollar weakness and proportional gold-strength.
Thursday, August 15 at 8:30am EDT // Philadelphia Fed Manufacturing Index (Aug)
[consensus exp.: +10.0 // prev.: +21.8]
We spent some time last week discussing the core drivers of the sudden acceleration in gold’s uptrend and why there’s some downside risk involved with any one or two of those inputs fading back. It didn’t demand coverage at the time, but in my mind the most likely additional driver of risk-off worry and proportional gold strength is a marked slowdown in the US manufacturing sector. The Philly Fed survey has had a wild couple of months: crashing in June and then bursting above estimates in July. A moderation to somewhere in the middles is reasonable to expect this week but keep any eye out for continued deterioration. Until this environment shifts, it will be useful to identify other factors that could boost (or at least sustain) gold’s run.
On that note…
Thursday, August 15 at 8:30am EDT // Non-Farm Productivity (Q2)
[consensus exp.: +1.8% QoQ // prev.: -1.6%]
Productivity isn’t typically a big monthly marker for those concerned with the gold market, but ugly data here (as with the major manufacturing surveys) could add to the worries of a jittery American marketplace.
Thursday, August 15 at 8:30am EDT // Initial Jobless Claims
[consensus exp.: +212k // prev.: +209k]
Thursday, August 15 at 8:30am EDT // NY Empire State Manufacturing Index (Aug)
[consensus exp.: +1.85 // prev.: +2.5]
The Empire State survey looks likely to be more sluggish than its cousin from Philadelphia, and the same potential for warning signs about the US manufacturing applies. One extra note: because both surveys, along with productivity and jobless claims data, will be released at the same time on Thursday it may be a challenge initially to sort out the most relevant details for metals pricing.
Thursday, August 15 at 9:15am EDT // Industrial Production (July)
[consensus exp.: +0.1% MoM // prev.: flat]
Thursday morning’s two Fed surveys of the manufacturing industry will assess a time period slightly ahead of the Industrial Production growth data for July. Probably a quiet number this month.
Friday, August 16 at 8:30am EDT // Housing Starts (July)
[consensus exp.: flat MoM // prev.: -0.9%]
Similarly, any potential pass-through from Friday’s housing data into US Dollar pricing and then on to gold markets is going to be dwarfed this week by trade concerns, Fed watching, and manufacturing data. Still, best that we don’t fall into the bad habit of tracking forward indicators for the US economy—even when they get a little boring (see Initial Jobless Claims.)
Friday, August 16 at 10am EDT // Univ. of Michigan Consumer Sentiment (Aug)
[consensus exp.: 97.3 // prev.: 98.4]
The most recent tumble in US equities markets could weigh down on this read of consumers’ attitudes about the health of the economy and its outlook, but I suspect it’s a little too early to really impact the data. Of course, if last week’s selling persists, we could see market sentiment really sink in September and put more pressure on the Fed to cut again.
Global Economic Data to Watch
Wednesday, August 14 at 2am EDT // German GDP (Q2)
[consensus exp.: -0.1% QoQ // prev.: +0.4%]
We’ve been light on coverage of European macro data lately, because the primary issues for the global economy and metals and currency markets in particular have been mostly Dollar-denominated. As I’ve discussed before, the policy positions of the world’s other major central banks do impact just how much the FOMC’s stance/actions effect US Dollar markets and highly correlated assets like gold. For that reason, I’m keeping Germany’s growth prospects on my radar. The EuroZone as a whole is well on its way to its own round of rate cuts (and QE), and just how poorly things are working in the EU’s economic engine room will have a lot to say about just how drastic those first moves will be in September.
And that’s the calendar as it lays out before us, traders. I wish you all the best of luck in the markets this week, and I’ll see you back here on Friday for a breakdown of the week’s events.