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 modestly higher just after the start of US trading, after some weakness during the overnight sessions.
We have an important Fed meeting sitting on the docket for Wednesday, but the calendar for this week is otherwise sparse in terms of macro data that may impact the gold market. Instead, there are developing and ongoing narratives in Washington and China that (along with the ever-present uncertainty created by surging variants of the Covid-19 virus) are weight heavy on investors’ minds and effecting the market mood in ways that might pass through to gold’s chart as well.
Already this morning, we’re seeing the impact of these concerns on financial markets, broadly. Gold prices are benefiting from a serious risk-off mood as investors grow increasingly uneasy and few can do anything but wait to see what comes next in the story of a possibly collapsing real estate giant in China, while analysts and economists are miles away from any consensus on whether such a shock would be confined to the Chinese markets, or carries the contagion risk of another “Lehman moment.”
Closer to home, we’ve come all the way back around to the now-familiar game of faux brinksmanship in Washington that is debates around the US government’s “debt-ceiling.” There are very few who consider any possibility that Congress would fail to raise/suspend the arbitrary spending limit (which could then lead to a default,) but everyone’s lease favorite politicians are still going to drag this out much longer than necessary, and markets may become further unsettled despite (generally) knowing better.) This kind of risk-averse mood can be expected to be broadly positive for gold as a safe-haven, but it shouldn’t be expected to stand up to the downward pressure that the FOMC might apply to the yellow metal on Wednesday.
US Economic Data to Watch
Wednesday, September 22 at 2pm EDT // FOMC Meeting
[No meaningful changes to monetary policy expected.]
We’ve emphasized “policy” above, because the key pivot for gold prices this week—likely as not, for this month at the least—will turn on the question of whether or not the Fed used this meeting to update its forward guidance, giving “official” notice that it will start tapering asset purchases in November (or possibly December) of this year. While the mood seems to be tipping towards guidance being announced this week, it’s far from a certainty (especially in light of last month’s big NFP miss.) As we’ve seen over the last few months, a step towards tapering—one way or another, a step towards higher rates—should put acute downward pressure on gold prices; while a somewhat unexpected decision to put the announcement off for at least another month should conversely lift gold prices higher. Because we’re talking about the Fed actually making a change this time, the weight of the market reaction will like probably be stronger than what we’ve seen following labor market and inflation data points.
We’ll also get an updated packet of economic projections from the Fed at this meeting. For the first time in maybe a year, they will probably take a backseat to the statement and press conference with few (if any) meaningful expected.
Thursday, September 23 at 830am EDT // Initial Jobless Claims
[consensus est.: +320K // prev.: +332K]
Wednesday’s FOMC meeting is a sizeable screen that sits between us and the last two trading sessions of the week; We can make some projections about the market’s mood and temperature, but it’s even tougher than usual to get specific about which way assets like gold or the Dollar will be trending or what new inputs might impact that course. That said, weekly labor market data has been broadly positive lately and is expected to continue in that direction. Especially if that Fed has announced plans the day before to begin tapering, investors will probably overlook this week’s jobless claims release. On the other hand, if the FOMC foregoes that change and (maybe explicitly) ties the delay to labor market lags, we could expect the Dollar and gold to be much more reactive than usual to this weekly print.
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.