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 have started the week off on the front foot, picking up nearly $20/oz from the Sunday night opening bids as the precious metals markets appear to be correcting some degree of the over-selling that hit commodities at the end of the last week.
Action farther out on the US Treasuries’ curve makes it hard to argue that this is the start of a general rebound in 2021’s reflation trade after Wednesday’s FOMC news; But one of the biggest benefits for gold prices this morning does appear to be some weakening in the US Dollar after a surging Greenback seriously dented the overall commodities complex late last week. Alongside a light data calendar and thick schedule of appearances and remarks from Fed officials this week, we’ll be closely tracking that relationship between strength in the Dollar and opportunities for a gold rebound in quick order this week.
US Economic Data to Watch
Thursday, June 24 at 830am EDT // Initial Jobless Claims
[consensus est.: +380K // prev.: +412K]
Weekly labor market data has drawn considerably less focus in Q2, and had little direct market impact. Although that’s not expected to change just now, last week’s reading was the first jerk higher since the end of April. Analysts will be looking for the trend to resume falling, but another print back above 400K might tilt US Dollar and commodities markets into a risk-off mood ahead of Friday’s inflation data.
Friday, June 25 at 830am EDT // PCE Price Index (May)
[(core PCE) consensus est.: +3.4% YoY // prev.: +3.06%]
[(headline PCE) consensus est.: +3.9% YoY // prev.: +3.58%]
Friday, June 25 at 830am EDT // Personal Income & Spending (May)
[(spending) consensus est.: +0.4% MoM // prev.: +0.5%]
[(income) consensus est.: -2.7% MoM // prev.: -13.1%]
The Fed’s own measurement of consumer inflation in the US economy should broadly align with the CPI readings released for the same period on June 10, a second consecutive month of highly elevated inflation that the Fed considers to be a temporary reaction to the US economy re-opening post-lockdown and global supply chains rushing to catch up. In that case, part of the overall market reaction was a surging rally for gold prices that pushed spot prices back towards $1900/oz. While the reported data will look similar this week, it’s tough to imagine the same kind of momentum getting behind gold a second time around. Still, it’s possible that the yellow metal will benefit from a smaller boost, but the question of how sustained that kind of tailwind might be will depend on how much weakening we’ve seen in the Dollar Index—which should remain the heaviest resistance to a gold rally right now—by that point in the week.
The tallies of personal/household income and spending should be uneventful this month: spending should remain mostly constant as the re-opening of American commerce has hit its stride, and analysts expect another month-to-month drop in income as the last bit of juice from the American Rescue Plan’s direct payments wears off.
FedSpeak this Week
Following last week’s hawkish (but also maybe dovish?) tilt from the FOMC’s economic projections, the schedule of public appearances by Fed officials looks full to bursting; So markets might be able to wrap the week with more clarity on the committee’s views and plans around current levels of inflation. Given the benefit of a few more days to parse and process last week’s FOMC, investors and managers now seem a little clearer on the reality that the Fed’s position hasn’t really changed that much with regards to keeping monetary policy loose for a while yet. Coming so soon after Wednesday’s press conference, Chairman Powell’s regular testimony before congress on Tuesday can be expected to be a repeat performance. While we may hear some decent from that view on the part of some Fed officials this week (St. Louis’ Bullard comes to mind,) and that may briefly inject some volatility into trading, it seems likely that the heavyweights of the FOMC will use their time to reinforce the “transitory inflation” party line.
Monday: New York Fed President John Williams (FOMC voter) (3pm EDT)
Tuesday: Cleveland Fed President Loretta Mester (non-voter) (1030am EDT); San Francisco Fed President Mary Daly (FOMC voter) (11am); Fed Chair Jerome Powell (FOMC voter) (2pm)
Wednesday: Fed Governor Michelle Bowman (FOMC voter) (9am EDT)
Thursday: Atlanta Fed President Raphael Bostic (FOMC voter) & Philadelphia Fed President Patrick Harker (non-voter) (930am EDT); New York Fed President Williams (11am); St. Louis Fed President James Bullard (non-voter) (1pm)
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.