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.
Gold prices are starting the week off on the good foot, moving forward with the momentum from last week that has lifted spot prices beyond the $1800/oz as we get into November trading. Gold’s pricing is also getting some support from US Treasury yields remaining suppressed and even mild pullback in the US Dollar Index to begin the week.
This week’s calendar is much quieter than last week, but gives us a few opportunities to hear from important FOMC officials following last week’s taper announcement; We will also get an updated look at consumer price inflation in the US economy, which is expected to remain stubbornly high and might provide additional tailwinds for gold.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Wednesday, November 10 at 830am EST // Consumer Price Index (Oct)
[(core CPI) consensus est.: +4.3% YoY // prev.: +4.0%]
[(headline) consensus est.: +5.8% YoY // prev.: +5.4%]
Consumer inflation in the US is expected to remain roughly on-pace with the trends that have dominated pricing, and policy discussions for most of 2021—with a slight acceleration compared to September as the supply-chain-sensitive categories which stoke most of the inflationary heat being joined by price recovery in travel and other inputs that were muted by the consumer worries in the Delta surge. Now that the Fed has “moved”, we may see the immediate impact of CPI data (on target, or otherwise) lessened, but not null. Because the FOMC seems to have a present path, it’s possible that these higher inflation reads will push gold prices higher if investors begin (or continue) to worry that inflation will continue to run hot—or hotter—in the months between now and Summer 2022, and go looking for a safe haven. Even if that is the mechanism, it has a limit on the upside: If inflation data ride high for too much longer, investors may start inferring pressure on the Fed to taper faster and/or hike rates sooner; the suspicion of which would take a lot of wind out of gold’s sails.
Wednesday, November 10 at 830am EST // Initial Jobless Claims
[consensus est.: +265K // prev.: +269K]
This Thursday is Veterans Day in the US, and while the equity markets will be up and open for the day bond markets should be closes and data reporting is moved off of the 11th, putting the weekly labor market data on Wednesday. This has been trending reliably downward for several weeks now, which means investors have become generally insensitive to the week-to-week data once again; but it will continue to be a useful input for estimating if last week’s October Jobs Report was really a shift back to recovery after an ugly August-September, or if there might be more pain to come in the labor market. (For this week, specifically, it will be difficult to attribute any market movement to Jobless Claims as they will print at the same time as the CPI data.)
FedSpeak this Week
At the close of last week’s FOMC meeting, the Fed announced the start of its program taper and laid out a general outline for the path to fully winding-down the asset purchasing facility—stated as a prerequisite to any rate hikes—next summer. The work of Fed-watching in the coming months will be to: a.) Form an impression of how unexpected shifts in the key US macro numbers (labor market, inflation) might push the Fed to taper faster or more slowly; b.) Determine just how closely linked the completion of the taper is to the Fed’s first interest rate hike—some desks are projecting that a hike would come at the very next meeting (roughly, June or July 2022,) but the Fed has already made some efforts to moderate the market’s expectations. These are the larger questions for which analysts and investors will look for useful clues in the public commentary of Fed officials this week (and beyond.) While the time-horizon in question means that FedSpeak is unlikely to directing pressure metals markets, gold prices may be sensitive to commentary this week by way of volatility in the US Treasuries market.
Monday: Fed Vice Chair Richard Clarida (FOMC Voter) (9am EST); Philadelphia Fed President Patrick Harker (non-voter) (12pm); Chicago Fed President Charles Evans (FOMC voter) (150pm)
Tuesday: Fed Chair Jerome Powell (FOMC voter) (9am EST); San Francisco Fed President Mary Daly (FOMC voter) (1135am)
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.