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 on Tuesday are trading roughly $10 below their overnight peak, and at a slightly greater discount to the first prices traded on Sunday evening; Silver prices are likewise down from the overnight sessions. Both metals however, have seen strong support buying as cash trading has gotten started in the US market for this week, paring back much deeper losses tallied during pre-market trading.
With another Senate impeachment trial behind us, investors (and, presumably, legislators) have fixed their attention on this week’s efforts from the Biden Administration to craft and finalize a massive COVID-19 relief package that can pass the narrow doorway of earning passage through a partisan Senate while remaining actually effective. Investors and analysts are expecting the stimulus bill to be the main focus of Washington this week with the White House making public and private pushes to get their deal done. Markets seem to expect some level of success for the Administration as managers and traders appear to be positioning themselves for an onslaught of government spending and (possibly) accelerating inflation: Yields on the benchmark US Treasury 10-year note have continued to climb this morning, and have reached close to 1.3% at the time of writing.
— Bloomberg Markets (@markets) February 16, 2021
This week’s holiday-shortened economic data calendar is a little light, but does have some points worth tracking: Wednesday’s look at Retail Sales will give some color on how much the most recent stimulus cash got funneled directly back into the economy, and meeting minutes from the most recent FOMC gathering could lend further support to President Biden’s push to get another, much larger round.
US Economic Data to Watch
Wednesday, February 17 at 830am EST // Retail Sales (Jan)
[consensus exp.: +1.0% MoM // prev.: -0.7%]
Economists and analysts are expecting a steep improvement in the volume and value of retail business done in the month of January, as the initial and strongest impact of the last Congress’ late-December deal to get $600 checks out the door and a boost to unemployment payments should be seen in this cycle. There’s been a lot of debate about how much of their stimulus payment “the average American” would spend vs. save, though, and not a lot of visibility on how things are actually playing out; Because of this, there’s a wider than usual spread in experts’ estimates for a boost in Retail Sales. While the consensus mark is around 1% month-over-month, some reliable desks are calling for an increase as high as 2%. If the broad optimism of investors survives the first day of trading, I can imagine an above-consensus number boosting risk appetite further—risk appetite that, on Tuesday morning at least, seems to be a headwind for gold above $1800/oz.
Wednesday, February 17 at 2pm EST // FOMC Discussion Minutes
The Fed of course kept short-term rates and other avenues of monetary policy support unchanged at the end of last month’s FOMC meeting. The notes and minutes from that meeting will most likely reinforce the message that the highest-level member, like Chairman Powell and New York Fed President Williams, have been pushing for a few months now: Ultra-easy monetary policy will not be enough to support a broad-based recovery in the US economy unless it is matched by aggressive fiscal stimulus. How the amplification of this message will influence gold prices has been tough to predict ahead of time. It’s safe to assume that investors will use it as further justification to position for a major fiscal spending increase and the assumed rise in inflation somewhere along the curve; What’s less clear on Tuesday morning is whether the majority of investors will choose to express that outlook by pushing interest rates higher (which will keep pressure on gold prices) or increase gold positioning as an inflation hedge.
Thursday, February 18 at 830am EST // Initial Jobless Claims
[consensus exp.: +765K // prev.: +793K]
Jobless claims attract some attention right now largely because of how unreliable the consensus estimates have been, and how often meaningful revisions are being made to the prior week’s data. Above or below 800,000 (and by how much) continues to be the determining factor for optimism or pessimism in the outlook. Given that the last unexpected drop well below 800K was revised back above the line of demarcation just a week later, I imagine any investor optimism around a “good” number will remain muted for now, and that the weekly number of unemployment claims will mostly have a risk-off effect on markets if it has one at all.
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.