Good morning, traders; Welcome to our market week preview, where we take a look at the economic data, market news and headlines likely to have the biggest impact the price of gold this week and beyond, as well as market prices for silver, the US Dollar, and other key correlated assets.
After sliding slightly during some generally listless trading in the overnight sessions, gold prices are sitting just below last week’s closing price after the US cash market opened with a bid higher for the yellow metal alongside stocks.
This ought to generally be a positive sign for gold’s opportunities to advance in the trading week ahead, assuming it will continue consolidating near or at $1900/oz. The biggest challenge to the reflation rallies in gold and silver, as well as other key commodities, and US equities, may well come from Thursday’s report on consumer inflation levels.
US Economic Data to Watch
Thursday, June 10 at 830am EDT // Consumer Price Index (May)
[(core CPI) consensus est.: +3.4% YoY // prev.: +3.0%]
[(headline CPI) consensus est.: +4.7% YoY // prev.: +4.2%]
It’s challenging, from the point of view of Monday morning, to project what kind of mood investors and the overall market will be in on Thursday with regards to the threat of too-hot inflation as a result of super-loose Fed policy (imagined or otherwise.) That said: If we assume that the state of play remains similar to how we wrapped last week after the May Jobs Report—which suggested that any interest rate hike is well over the horizon of at least 2022—then this week’s updated read on consumer price inflation might swing market sentiment the other way; Perhaps briefly, or perhaps with enough momentum to effect the whole week’s performance.
If investors and managers suddenly get nervous about inflation again because May’s CPI remains elevated as in April, I would anticipate US stock markets pulling back while the Dollar strengthens against its main trading partners. Gold’s immediate path is less clear: Likely the strongest impulse would be for the yellow metal’s chart to fall alongside equities as investors envision a sooner end to the Fed-juiced reflation trades; However, gold could also attract some immediate interest as safe haven hedge against fears of extra-high inflation. In this situation, the tie-breaker (so to speak) will probably be how aggressively US Treasury yield’s move in reaction the inflation data. The faster that yields jump, the more likely it is that gold will fall.
It is totally possible (and, to speak for myself, preferable) for the market to absorb a core CPI print above 3% in the context of the unique recovery that the US is trying to undergo without the dramatics and volatility of last month. It’s possible, but hard to feel confident about.
Thursday, June 10 at 830am EDT // Initial Jobless Claims
[consensus est.: +370K // prev.: +385K]
Jobless claims will almost certainly get overlooked this week for all of the attention being paid to the monthly inflation reads release at the same time on Thursday. The positive sentiment of seeing new weekly unemployment filings hold below a pace of 400K, however, will contribute to keeping the reopening/reflation trades going later this month after the dust settles around CPI.
And that’s how the week lays out ahead of us, traders. As always, I wish you all the very best of luck in your markets in the coming days, and I’ll look forward to seeing you all back here on Friday for our market-week wrap up.