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 holding steady on Monday morning as markets in general seem to be in an optimistic holding pattern ahead of another big week of earnings reports, this time accompanied by some key macroeconomic inputs. Gold picked up roughly $5/oz after global markets reopened on Sunday evening, and have held relatively steady in the hours since.
From a macro perspective, our attention this week falls on Wednesday’s FOMC meeting and press conference, followed by a first read on Q1 economic growth on Thursday morning and then the Fed’s report on consumer price inflation. Also of note this week: President Biden will address a joint session of Congress where he is expected to lay out the Administration’s plan for an increase to capital gains taxes for the wealthiest Americans. We’ll be watching to see if the formal announcement stutters the markets in the same way that the initial reporting did last week.
For now, let’s have a look at the economic calendar for the days ahead.
US Economic Data to Watch
Wednesday, April 28 at 2pm EDT // FOMC Interest Rate Decision
[No meaningful changes to monetary policy are expected.]
For now, Jerome Powell and the Fed seem to have broken the will of inflation hawks who, for much of February and March, seemed to be pushing bond yields (and, therefore, projected interest rates) higher at any sign of post-pandemic inflation. The FOMC rode out the turbulence and continue to predict that the current ticks higher in inflation measures will be transitory; A comparative reflection of how damaged the economy was a year ago rather than a reliable signal that the current economy is overheating. With that debate won (for now,) this week’s FOMC meeting looks to be pretty uneventful. The Fed’s statement will likely acknowledge the improvements in the US economy since the March meeting, but I expect Powell, in his press conference, to reiterate that there’s still a lot of work to do. I will also be watching the Chairman’s Q&A to see how he handles any questions on how the Fed imagines the Biden Administration’s proposed increase to capital gains taxes might impact financial conditions. There’s little chance of that discussion moving markets this week, but it could be informative for modeling future conditions.
Thursday, April 29 at 830am EDT //GDP Growth (1st read) (Q1 2021)
[consensus est.: +6.5% QoQ // prev.: +4.3%]
Now, after all that I just said about inflation hawks having gone quiet, a much stronger than expected first read on Q1 economic growth (Goldman Sachs is projecting something closer to +7.5%) might stir them up again. Either way, it’s likely that the GDP reporting this week will boost the re-opening/reflation trade that has been driving US equities recently while also helping to propel gold prices higher alongside other commodities. As long as the stock market hasn’t reached escape velocity from the yellow metal by Thursday morning, there may be some accelerated tailwinds for gold prices.
Thursday, April 29 at 830am EDT // Initial Jobless Claims
[consensus est.: +550K // prev.: +547K]
Another week well below 600,000 initial jobless claims (as projected) will all but guarantee a very strong April Jobs Report, even if it doesn’t have an immediate impact on markets this week.
Friday, April 20 at 830am EDT // PCE Price Index (Mar)
[(core) consensus est.: +1.8% YoY // prev.: +1.41%]
[(headline) consensus est.: +2.3% YoY // prev.: +1.55%]
As with a strong GDP read on Thursday, with the Fed’s measurement of consumer inflation expected to report that the headline inflation rate ran above 2% in March may stir up some knee-jerk inflation fears which we could see enacted in the Treasury market. Even if that’s the case, I expect any turbulence to be mild and short-lived as the less-volatile, more important “core” PCE number should still be well below the 2% target. The Fed will point to that number in particular during public remarks over the next few weeks, as a reliable indicator that the US economy still was growing to do before we can even call it “recovered,” much less “overheated.” The reaction to higher PCE inflation numbers may see gold come under pressure initially if Treasury yields do rally higher; And, while the drivers of that pressure should be short-lived, traders should be wary of it kicking off a rush of Friday profit-taking in a move that we saw pushing gold lower to end last week.
And that is 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.