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 spot prices have softened somewhat as the market prepares itself for the first FOMC meeting of 2023 and possibly some news about the path ahead for monetary policy and the US economy.
US Economic Data to Watch
Wednesday, February 1 at 2 pm EST // FOMC Interest Rate Decision
[The FOMC is expected to announce an interest rate hike of +0.25%]
This week's FOMC rate hike will feel like a throwback to the days of yore (pre-2021) when the US central bank would only hike rates by a modest +0.25% each time. As this has been the consensus for a few weeks, at least, we mostly see this priced into the gold market-- both the expectation of a rate hike (gold prices have softened a bit today…) and the smaller increment (…but only just.) The question that's up in the air this week is how will the Fed communicate its path for the first half of 2023 and beyond? The FOMC has taken every opportunity given by the public engagements between meetings to push back on the market expectations for fewer hikes and sooner cuts, but communicating from the focal point of an official meeting is a different animal, and we could see some dovish shading. Were that to be the case, expect a strong tailwind on Wednesday for gold prices; should Powell & Co. retrench on the hawkish side, gold prices are likely to slide a little more.
Friday, February 3 at 830 am EST // December Jobs Report
[(NFP) consensus est.: +185K // prev.: +223K]
[(unemployment) consensus est.: 3.5% // prev.: 3.6%]
We've settled into a pretty consistent pattern with the BLS' monthly US Jobs Report since early 2022: the "consensus" predicts a decline in job growth as the Fed continues to slow the economy in an effort to tame inflation, but still a relatively healthy number; the number comes in above--often well above-- expectations and both the equity market and the gold charts shudder and stumble for the idea that the Fed will be emboldened to continue (or accelerate) it's tightening. It's tough to say if we would follow that pattern after the December report arrives this week without knowing exactly how the Fed will set the table. There are some out-of-consensus projections for a number well above +250K this month, so another strong outperformance is well within the realm of possibility. This time around, the only clear signal for the gold market is to be prepared for volatility just ahead of the weekend.
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.