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 start the short week trading just below Sunday’s opening bell after the spot price was overtaken, surprisingly, by a run of profit-taking on Friday afternoon and lost its purchase on $1800/oz.
Global markets appear in a negative mood as US trading spins up, with investors hemming and hawing about the latest headlines around Congressional intransigence, debates and speculation about possible lockdowns in developed nations as a response to the Omicron Covid variant, and some doubt arising in bond markets that the Fed will stick to the aggressive monetary policy plan it hinted at last week. The key question for gold traders to start the day will be whether these generally risk-off tones drive investors into the Dollar (at the expense of gold) or into the yellow metal as a safe haven.
This week’s calendar is light, as expected in the final run up to Christmas, although we do get the result of the Fed’s tabulations of inflationary forces in the American economy on Thursday. This week is also the time to issue an annual warning that market depth (and, in some areas, liquidity) during US and European trading hours will be much shallower this week and next. As a result, if there is any unexpected shock to a key market or sudden change in overall risk appetite, the impact on
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Thursday, December 23 at 830am EST // PCE Price Index (Nov)
[(core PCE) consensus est.: +4.5% YoY // prev.: +4.12%]
[(headline PCE) consensus est.: +5.7% YoY // prev.: +5.05%]
Thursday, December 23 at 830am EST // Personal Spending/Income (Nov)
[(spending) consensus est.: +0.6% MoM // prev.: +1.3%]
[(income) consensus est.: +0.5% MoM // prev.: +0.5%]
This month’s release of the Federal Reserve’s in-house data set on inflation pressures in the US economy is expected to play out—both in the numbers and the market’s digestion of them—similar to October’s data a month ago. In the numbers, the pace of price increases (for consumers and producers together) over the 12 months ending last month will have heated up slightly more than the 12 months ending in the month prior (and at a new high for this cycle); Meanwhile, the monthly rate of inflation will have slowed relative to October (implying, at least to optimists, the possibility that inflation is putting in a top for Christmas.)
The market reaction should be relatively mild, given that investors have processed their feelings about not only the November CPI data but also last week’s FOMC announcement that was in part a reaction to recent inflation data. The one caveat that may me worth making here is that Powell’s commentary last week that made an effort to argue that the timing of the Fed’s first rate hike next year will still be data-dependent (and not just an automatic move once the taper is completed) might animate investor’s reaction to any and all inflation (and labor market) headlines in the coming months. And, even if that reaction were moderate relative to a normally functioning market, it could be amplified by shallow holiday markets. (The primary correlation should still hold up: If the market perceives a greater likelihood of an earlier rate hike, gold prices will come under pressure.) This should be considered as unlikely to happen this week, but it’s still worth keeping an eye on.
Thursday, December 23 at 830am EST // Initial Jobless Claims
[consensus est.: +205K // prev.: +206K]
As we mentioned above, the FOMC’s data-dependent timing for hiking rates next year will refresh the market’s and investors’ focus on key inflation data, and especially on key labor market data given that Chair Powell specifically named achievement of the Fed’s “full employment” target as a pre-requisite for the first hike. This scrutiny likely won’t really kick in until after the holidays, but there may be some that are ready to pounce on an outlier Initial Jobless Claims read even on Christmas Eve-Eve. If they are hovering around markets, they’re not likely to find much bait. The trendline continues to hold close to 200,000 and seems to be building a case that the Fed may be out of excuses not to hike by the time the taper wraps up in March. (This may eventually create a strong headwind against gold’s efforts to build a consistent spot price above $1800. We’ll have to see if that kind of pressure presents itself before the new year.)
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 for our market-week wrap up.