Good morning, traders; welcome to our market week preview, where we look at the economic data, market news, and headlines likely to have the biggest impact on the price of gold this week and beyond, as well as other key correlated assets.
Gold prices are higher in the first full trading session of 2023 as we kick off another holiday-shortened week.
The yellow metal appears to be carrying the upward momentum that came to the fore last week, with investor expectations for Wednesday's FOMC minutes providing an extra tailwind.
US Economic Data to Watch
Wednesday, January 4 at 10 am EST // ISM Manufacturing Index (Dec)
[consensus est.: 49.0 // prev.: 49.0]
There's some hope that the re-opening process that recently began in China will drive improved activity in major manufacturing centers around the world. That may prove to be true, to the benefit of the global economy, but expectations around the US sectors are for a muted pass-through in December-- conditions are expected to not have improved, so much as just not gotten worse. Investors seem primed at the start of the week to interpret any data point that could be a positive signal for gold prices as a positive signal in-fact; we would expect the same here. A print (as expected) below the 50.0 breakeven looks enough like a risk-off signal to encourage more flow into gold as a safe haven.
Wednesday, January 4 at 2 pm EST // FOMC Discussion Minutes
Tuesday morning's tone, in the gold market and across the marketplace more broadly, suggests that Wednesday's FOMC meeting minutes (from the December session, at which the committee stepped down the size of the inflation-battling rate hikes to "only" +50 basis points) holds investors' attention the most. The next FOMC meeting, which comes in February, is more of a mystery than the central bank has allowed in several months; a return to triple hikes seems highly unlikely. But will the FOMC decide to go by +0.50% again? Or continue easing the pressure on the economy by stepping down again to the traditional 25 basis point movement? And, looking back, how hotly debated were December's changes? As has become the sturdy norm since last spring, any signal towards easing (or easier) monetary policy should further boost gold; implications that the committee will be hesitant to slow down further will be a tailwind for the US Dollar to the detriment of gold (and most other assets.)
Friday, January 6 at 830 am EST // December Jobs Report
[(NFP) consensus est.; +200K // prev.: +263K]
[(unemployment) consensus est.: 3.7% // prev.: 3.7%]
For December's key Non-Farm Payrolls number, the market consensus, as it has been for months running, is for a moderate slowdown to a still-strong 200K jobs added to the US economy over the period. For those same months running, the actual number has come in higher than expectations-- last month, by more than 60,000. It puts those of us tasked (or at least, interested in) projecting the new numbers in a difficult position because: how long can the trend hold? Surely the next Jobs Report reverts towards expectations, and yet, the next numbers always outperform. Bases on the trend, we would look for gold to weaken even if the headline NFP number comes in as expected. 200K or better still implies that the Fed can continue tightening more or less at will. That, combined with a general risk-on swing that comes from objectively healthy economic data. Should the NFP unexpectedly break closer to 150K, that even would drive the opposite reaction and a rally in gold prices. (We think.)
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.