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 other key correlated assets.
Gold spot prices are falling this morning following the July 4th holiday in the US, and have broken well below recent support at $1800/oz.
This is not a story about investors turning away from gold for reasons of risk appetite or yield hunting, rather it’s a case of another oversized surge in the US Dollar this morning, which is applying strong downward pressure on virtually every other major asset (except US Treasuries.) At its base, the currently popular assessment that this move is primarily about recession fears—not just in the US, but around the globe—is likely accurate. This start to a truncated week puts extra importance on our one big data point of the week: the June US Jobs Report.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Friday, July 8 at 830am EDT // June Jobs Report
[(NFP) consensus est.: +273K // prev.: +390K]
[(Unemployment) consensus est.: 3.6% // prev.: 3.6%]
When it comes to which top-tier macroeconomic data point is the most important in the US economy, currently, the #1 spot has been shifting between inflation and the labor market for months now. Truly, the answer is probably just “whichever one is coming up next.” The drop projected for the NFP, to something just below 300,000 new jobs in June, still represents a healthy and “tight” labor market—certainly one that should still be able to back-stop the Fed’s aggressive efforts against inflation. That said, it wouldn’t be the most surprising thing to see financial media coverage primarily latch on to the idea that the chart is sliding down and to the right, regardless of context. An as-expected print, and especially a negative miss, here, would be one of the few instances where investors rotating to safety might prefer gold over the bull-running Dollar (since a poor labor market read would suggest slower/gentler Fed policy.)
FedSpeak this Week
This week’s slate of public appearances by FOMC officials is relatively thick, and sandwiches Wednesday afternoon’s release of the meeting minutes and discussion notes for the June meeting of the Fed’s policy committee (which concluded with the announcement of a massive +0.75% hike to the Fed’s interest rates.) The current consensus among investors, Fed watchers, and economists continues to be that the central bank will hike by another 75 basis points come the end of July; and fairly so, given that headline data on inflation remains hot and even some of the traditionally more dovish FOMC participants have are sending hawkish signals. The commentary from officials this week, and the most minute details of June’s discussion minutes will be examined for clues as to how long the Fed might be willing to ride this high-and-hawkish pace of tightening through the turn into Fall, given the risks of tipping the economy entirely into a recession if the hand is too heavy.
US Dollar markets could set a push of volatility Wednesday afternoon as the FOMC minutes are released and parsed for reporting, which may pass easily into similar volatility for gold.
Wednesday: New York Fed President John Williams (FOMC voter) (9am EDT); FOMC June meeting minutes released (2pm)
Thursday: Federal Reserve Governor Christopher Waller (FOMC voter) (1pm); St Louis Fed President James Bullard (FOMC voter) (1pm)
Friday: NY President Williams (11am)
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.