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 on the price of gold this week and beyond, as well as other key correlated assets.
Gold prices have taken an extra leg up in early morning trading, heading into the week with some positive momentum after last week’s rally, and provided a little bit of tailwind by the US Dollar Index slipping below 106 overnight.
This week’s top data point comes at the very end, with the July Jobs Report due on Friday to give us a snapshot of the health of the US labor market and, in doing so, signal how much more runway the Federal Reserve might have to continue with aggressive interest rate hikes like we saw last week.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Monday, August 1 at 10am EDT // ISM Mfg. Index (July)
[consensus est.: 52.0 // prev.: 53.0]
We saw last week how investors, at least in the short-term, can shrug off GDP data that marks a “technical” recession. Harder to ignore, we have to imagine, would be a slide in the national manufacturing activity survey that continues (as it has since early spring) long enough to show that the US industrial sector had fallen into (and remained in) a contraction. This month’s read is supposed to be another month-over-month decrease, but the expected print around 52 is deceptively healthy and distant from the 50.0 break-even, in practice. As will become a theme this week, the market risk here may not come from the hard numbers released but from the reaction of the market. Investors as a whole may buck at the sight of another decline, and turn towards safety in assets like gold or US Treasuries. Monday morning may still be too close to last week’s odd mix of positivity in the stock market and safe-haven demand elsewhere for a data point to really change the pulse of the market…
Wednesday, August 3 at 10 am EDT // ISM Services Index (July)
[consensus est.: 53.7 // prev.: 55.3]
…But that won’t be the case by Wednesday. The non-manufacturing, or “services” version of the monthly ISM reporting is similarly expected to continue a recent decline, which initially began as a reasonable pullback from a massive post-lockdown rebound but in recent months has looked more like a slowdown with worrying potential. The points made about ISM Manufacturing above generally hold for the services read as well this month. The additional factor, however, is that a more worried tone may have over-taken the market between Monday and Wednesday—or else a slide in the earlier number could exacerbate investors’ reaction to the later—in which case the potential risk-off pivot could be more aggressive in assets like gold, USTs, and the Dollar.
Friday, August 5 at 830am EDT // July Jobs Report
[(NFP) consensus est.: +250K // prev.: +372K]
[(unemployment) consensus est.: 3.6% // prev.: 3.6%]
Here, again this week, markets’ biggest unknown risk is the investor reaction to the headline number(s), and not necessarily the numbers themselves. If the US economy added roughly 250,000 jobs last month (the consensus projection,) that is still a very strong number for the labor market. However, with everyone trying to reckon whether last week’s recessionary GDP data actually mean anything for how the economy and/or the market will move in the months ahead, attention may well be focused on July’s number relative to the prior month (the expected print coming in more than 100K lower) than the absolute value—or context—of the number. (The blame for this might largely fall at the feet of the financial media coverage we see on Friday.) And, again, this could be a positive push for gold prices by driving more uncertainty about the outlook in the market; and it would be difficult to spin that number into a positive for USD, giving gold a little extra headroom to rise. Compared to the other data we’ve looked at for this week, Friday’s NFP print feels like there’s more potential for an upside surprise like we saw in June’s Jobs Report. In that case, we would probably look for the Dollar to surge (both as a pure reaction to positive data on US economic health, and through the Fed-reaction function because such a beat would raise the odds of the FOMC going for another aggressive hike in September,) which would be expected to impinge on any gains that gold’s spot price will have made by Friday morning.
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.