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 the truncated trading week roughly $10/oz stronger than Friday afternoon’s market close; Silver spot prices are back to $25.25/oz. The precious metals saw a sharp, brief sell-off at the lightly attended start of trading on Sunday evening, but rebounded with relative quickness and picked up a majority of today’s price improvement in the process. After some flat trading leading up until the US market holiday on Monday, gold prices have move with the low energy that is likely appropriate for the next four days.
We’re expected a mostly calm week in the world of economic data and even news flow—at least in as much as we can see things coming. I expect that, like a lot of observers in the US and around the world, investors will be paying attention to the headlines around Wednesday’s inauguration of the incoming Biden/Harris administration with a level of uneasiness that is rarely warranted; Given the events of January 6, it’s understandable. On either side of that date, we’ll still be keeping an eye on the progress of America and other developed nations’ hurried efforts to contain and vaccinate against the ongoing pandemic of COVID-19. The still-mounting numbers of infected or dead will likely be the strongest influence that headlines will press to markets this week, as the Biden COVID-19 relief package will wait until next week to be taken up by a full-week of “work” in Washington DC, and FOMC members are entering the blackout period ahead of next week’s policy meeting.
Looking back to the FedSpeak of yore (lo, those four long years ago,) Tuesday morning brings the start of confirmation hearings for Biden’s nominee for Secretary of the Treasury, former Fed Chair Janet Yellen. I expect little-to-nothing in the way of market-moving comments from Yellen, but we’ll be looking to see how she might set an anchor for fiscal expectations in the first 100 days of the new administration.
Let’s look at the points we do have on the data calendar in this holiday-shortened week.
US Economic Data to Watch
Thursday, January 21 at 830am EST // Initial Jobless Claims
[consensus exp.: +923K // prev.: +965K]
Last week’s worrying spike in Initial Jobless Claims came as analysts were finally starting to anticipate a continuous (if not accelerating) downtrend in new weekly claims; Even accounting for the annual sloughing-off of seasonal hiring for the holidays, the surge caught more observers by surprise. While expectations had been for the more useful four-week average to finally dip back below 800K, Thursday’s bad number has pushed the trend chart well above that level. In that context, I suspect those who regularly trade around the weekly labor market data will be on edge this week and so it would likely take another ugly shock, like a print above 1 million, to send traders and investors into a risk-off panic. On the other hand, a large drop in the new claims number—something that really drives home the idea that last week was a true outlier—would probably see a strong move in market sentiment towards a larger appetite for risk.
Thursday, January 21 at 830am EST // Philadelphia Fed Mfg. Index (Jan)
[consensus exp.: 11.3 // prev.: 9.1]
We’ve devoted less attention to the region-specific metrics for economic activity in recent months, as markets have been expected mostly slumping data amid the coronavirus pandemic and the clamp it’s put on manufacturing activity; But with a fairly quiet data slate this week, it’s possible that an surprise in the more important regionals measurements (like Thursday’s Philly Fed number) could catch investors’ attention. For context: Last week saw the Empire State data continue the trend of not only dropping month-to-month since the late-summer attempt to re-open the US economy, but also underperforming expectations each week. The drag in New York has caused analysts to downgrade their outlook for Philly as well, so a poor showing this week is most likely factored into asset prices, while an outperformance might goose stocks and/or the Dollar a bit higher to start trading on Thursday morning.
Friday, January 22 at 945am EST // Markit IHS Flash PMIs (Jan)
[(mfg.) consensus exp.: 56.5 // prev.: 57.1]
[(services) consensus exp.: 53.4 // prev.: 54.8]
Turning back to nationwide PMI activity data, while the manufacturing sector has managed to (however unenthusiastically) hold steady in recent months, the vital services sector has been trending worrying towards the 50.0pt break-even, a fall below which would signal contraction. As with the regional manufacturing PMIs though, the gloom is likely bloodlessly accounted for by investors and analysts at this point, so I’m not expecting a great deal of hand-wringing should the numbers come in as weak as expected. Of course, and surprise drop below 50.0 for January’s indices would probably send a strong risk-off jolt through the charts and drive a lot of investors to pivot to safe cash at the end of this week.
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.