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.
With market expectations for a new fiscal stimulus package to be passed in the near-term, gold prices this morning are trading near to—if slightly above—Sunday evening’s opening bids. Precious metals prices dropped sharply in the early hours of the morning, ensnared in some currency volatility as a result of reports that the eleventh-hour effort to secure a trade deal between the UK and the EU is crumbling. Gold and silver both had buyers willing to step in almost immediately, and after a mild rebound have seen a steeper rise as US trade desks take control of the trading day.
Looking at a very a light economic calendar, our attention this week remains on the efforts of the US Congress and outgoing White House administration to push through a fiscal stimulus package which recent economic data has highlighted is desperately needed. Markets’ will be moved this week by investors’ and economists’ impressions of if any deal rushed over the line by Christmas will actually have a meaningful impact on supporting the American citizens’ and the US economy’s recovery, and the question of if a historically ineffective congress can get anything passed at all will remain in play.
With that in mind, let’s take a quick look at the economic data calendar.
US Economic Data to Watch
Thursday, December 10 at 830am EST // Consumer Price Index (Nov)
[(core CPI) consensus exp.: +1.6% YoY // prev.: +1.6%]
[(headline CPI) consensus exp.: +1.1% YoY // prev.: +1.2%]
Expectations this week are for the key metric for consumer price inflation to broadly reflect the concerning trend we’ve seen from other recent economic vital signs: a noticeable slowing of the US’ first attempt at a “post-Covid” recovery. Looked at from the other angle, it’s a confirmation that well before the more severe rollbacks to lockdowns and other economic restrictions in a growing number of major metro areas, the American economy was already falling behind the pace. A deceleration in spending and price growth in the categories hardest-hit by the pandemic—air travel, vacation lodging, bigger ticket household items like new/used cars—is expected to drag on core inflation at least enough to stall growth at 1.6% (annualized,) although there are plenty of reputable analysts calling for a drop below 1.5%. November weakness in energy prices will ensure that the more volatile headline CPI number does more of a slide.
With gold (and other safe haven values) down and US equities still reaching for record highs, I have a hard time saying that this kind of worrying data is already baked-in to current asset valuations. However, recent market moves combined with the seemingly widespread understanding that the US economy will get worse (briefly or otherwise) before it gets better argue that could be the case. Still, the unexpected reaction in Treasury yields and equity prices following last Friday’s very disappointing Jobs Report (which saw both move higher on the news) appeared driven by the worsening data putting further pressure on Congress to pass meaningful fiscal stimulus; If we get to Thursday morning and have seen no tangible evidence of a rescue bill getting done—which seems exceedingly possible—we may see a much stronger risk-off reaction from markets in the face of further slowing in inflation. It would be out of the ordinary for CPI to bring about that kind of sharp swing towards higher gold prices, but it’s something I’ll be keeping an eye on this week.
Thursday, December 10 at 830am EST // Initial Jobless Claims
[consensus exp.: +725k // prev.: +712k]
A decline in new unemployment filings was the bright spot in a gloomy economic calendar last week. With some seasonal work rolling-off in December it’s reasonable to expect the weekly number to tick back up, but anything under 740k will probably avoid setting off any alarm bells. Realistically, the jobless claims data will get swallowed up by the market’s reaction to inflation data released at the same time so, barring reporting a number significantly above or below expectations, this number probably doesn’t drive much price action this week.
FedSpeak this Week
With the exception of an appearance by Fed Vice Chair Randal Quarles on Friday to discuss bank supervision, the slate for public appearances or commentary from Fed officials is empty this week due to the blackout period preceding the final FOMC of the year. I’m still including a FedSpeak section this week for two reasons: Partly to own my own mistake on Friday, in saying that I expected some relevant comments from Fed members this week, having forgotten that we were so close to the December meeting week. But mostly, I wanted to briefly mention the Fed because while the actual FOMC members will be silent over the next few days, there may still be a lot of talk around how the Fed is planning to manage monetary policy at the start of 2021 and the new Biden administration. With talks around some form of new fiscal stimulus appearing to heat up, it’s also possible we get some remarks from Janet Yellen, Biden’s nominee for Treasury Secretary and former head of the Fed. Markets would certainly take seriously anything Yellen has to say about the road ahead.
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.