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 out the week on the front foot, aided by a generally risk-off mood across global markets this morning.
Asian and European equity markets were rattled by some disappointing Chinese economic data during overnight trading and, without much else going on to start our Monday that malaise has carried over into the US stock markets: At the time of writing, all three major indexes have opened lower with the NASDAQ leading the drop.
Gold prices are also being given some room to run higher in the absence of the pressure we saw the Treasuries market putting on the yellow metal in recent weeks. The benchmark 10-year Treasury yield has continued to fall away from 1.3% this morning, which we market as a relevant inflection point last week.
Looking to the days to come, our week is fairly light on economic data and scheduled news flow as we move into the last weeks of summer. The rising threat of a Covid-19 summer surge will continue to be the most relevant topic for investors to keep an eye one; There also may be some possible steps forward (or backward) in the US legislative effort to pass a new infrastructure spending bill.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Tuesday, August 17 at 830am EDT // Retail Sales (July)
[consensus est.: -0.2% MoM // prev.: +0.6%]
Monthly retail sales data is expected to mark a mild contraction for the month of July. If the makeup of the Retail Sales report matches the expectations of most analysts, the pull-back will be less a result of structural issues keeping consumers’ cash in their pockets and more so an effect of some parts of the reopening boom moderating, and income support programs lapsing in some states. Arriving as expected, this data set should have little immediate impact on markets except to allow the perpetual march of US equities to continue (in which case, gold should be unbothered.) There is a risk that the contraction is steeper than expected; Something closer to -1%, maybe. Figuring out the gold market reaction in this case is tough to do from here, but the two possible market interpretations—that there’s a more serious systemic issue starting to slow the economy, or else that it ultimately just means the Fed can and will hold rates at the bottom for longer—seem to be mildly bullish for gold prices.
Wednesday, August 18 at 2pm EDT // FOMC Discussion Minutes
Investors and Fed observers likely won’t find a lot of useful new details in the release of the latest FOMC meeting minutes this week, particularly as the ground seems to have already shifted beneath the section of the committee’s statement that downplayed the risk that Covid-19 could present to the economy in the near term. The main thing we’ll be looking for is any extra color to shade whether the consensus will expect the Fed to introduce tapering plans into their forward guidance later this month in Jackson Hole, or hold off for at least another month. If that needle does move, the dance for gold should be simple to call: If new guidance at Jackson seems more likely, the yellow metal should come under some pressure; if expectation shifts the other way, gold could enjoy a decent tailwind through to Thursday morning.
Thursday, August 19 at 830am EDT // Initial Jobless Claims
[consensus est.: +365K //prev.: +375K]
Fed officials—most recently, and publicly, Neel Kashkari— are once again putting extra emphasis on the monthly labor market data to demonstrate when the economy is ready for the Fed to begin tapering (and tightening monetary policy.) With that in mind, and the original market consensus date for tapering to start coming up at the end of this year, we’ll keep a consistent watch on how the higher-frequency labor market data performs in order to anticipate what kind of marks the monthly reports might hit. As we mentioned above: steps towards tapering should be seen as generally bearish for gold; Changes that push that date away from us should generally be bullish.
FedSpeak this Week
There is not really a list of FOMC appearances to look over this week, but Chair Powell does have a scheduled town hall with a group of educators scheduled for Tuesday afternoon (130pm EDT.) Until recently I would’ve let this pass without mention, but we’ve seen in the last month how the right comments from a single Fed official at the right time can really jitter markets. Especially when there’s little else occupying the mind of investors.
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.