Good morning, traders. Welcome to our weekly preview of this week’s market calendar, with a particular focus on the economic data, news flow, and market narratives that are likely to have the biggest impact on the price of gold, as well as pricing for the US Dollar and other key correlated assets.
Gold prices are higher to start the week, setting the stage for the yellow metal to consolidate above $1750/oz this week as investors fret about a resurgent coronavirus and rising political uncertainty in the US and abroad. Silver is looking to break through resistance to once again trade above $18/oz. Aside from the economic data calendar, we’ll be keeping an eye on those climbing Covid-19 case numbers and whether or not they compel more companies (like Apple did last week) or state governments to roll back recent re-opening measures. We’ll also keep an eye out for sudden developments around global trade tensions. While last week ended with some rhetorical steps towards reconciliation between the US and China, the White House has had a rough weekend and may be on the war path this week; in that case, firing some new shots at China could seem like an easy win.
For now, let’s take a look at the calendar for our next five trading days.
US Economic Data to Watch
Monday, June 22 at 10am EDT // Existing Home Sales (May)
[consensus exp.: -5.6% MoM // prev.: -17.8%]
Housing Starts data for May was a miss to the downside last week, and I do think there’s room for economists to be concerned about how a lagging housing market might restrain the first or middle stages of a US economic recovery. That data set got swallowed up by the weird Dollar surge that pressurized gold prices last week before the yellow metal rallied-up, so it’s tough to model how safe havens will move this morning on another dent in Existing Home Sales. I wouldn’t bet on a big move, but I’ll be watching how it sets the tone for gold’s Monday.
Tuesday, June 23 at 9:45am EDT // Markit Flash US PMIs (June)
[(manufacturing) consensus exp.: 50.8 // prev.: 39.8]
[(services) consensus exp.: 48.0 // prev.: 37.5]
We’ve been watching Purchase Manager’s Indices—economists’ preferred metric for “economic activity”—climb back from the depths of April’s crisis-cracked numbers, both on a regional and national scale. Expectations are for that trend to continue on Tuesday. Even though Markit’s data sets are not usually views as being as valuable as the ISM data for the US, I can imagine we might see some enthusiasm around this release if the manufacturing sector PMI does print above the breakeven of 50.0, indicating a return to expansion. Presumably, this would be a risk-on pulse for markets.
Thursday, June 25 at 8:30am EDT // Durable Goods Orders (May)
[consensus exp.: +10.9% MoM // prev.: -17.7%]
Durable Goods typically lags other monthly data on the calendar, so we’ll just this week be seeing May’s (presumed) rebound in the pace of orders from a dire April data set. Based on the PMI and Industrial Production numbers we already have for May (and other industry data,) a 10% uptick seems reasonable, and fairly priced into Dollar markets. The less-volatile “core” reading isn’t expected to see at much of a bounce this time around, which could be a concern in the medium-term but looks unlikely to rock markets this week.
Thursday, June 25 at 8:30am EDT // Initial Jobless Claims
[consensus exp.: 1,350k // prev.: 1,508k]
Economists and analysts are getting nervous that, over the past couple of weeks, the trend line for new unemployment claims is threatening to plateau as high as 1.5million per week, which means that gold has been getting solid safe haven support on Thursday mornings (although usually capped by an also strong Dollar.) A print nicely below 1,500k as expected this week will probably relieve some of that pressure and see some positions rotating out of safety.
Friday, June 26 at 8:30am EDT // Personal Income & Spending (May)
[(spending) consensus exp.: +8.8% MoM // prev.: -13.6%]
[(income) consensus exp.: -6.0% MoM // prev.: +10.5%]
As the US economy took steps towards reopening and recovering in May, analysts expect that US household, while not necessarily regaining lost jobs at a similar pace, loosened their belts and purse strings a little bit in hopes of a strong and quick recovery. That’s why the expected data set flips from April, with income falling while all-important spending rebounds. This feels like one of the bigger market risk points in the week to me: if spending fails to rise as expected, that might put a strong (if temporary) shock into US markets and drive investors into non-Dollar safe havens like gold.
Friday, June 26 at 8:30am EDT // PCE Inflation (May)
[(core infl.) consensus exp.: +0.9% YoY // prev.: +1.04%]
[(headline infl.) consensus exp.: +0.5% YoY // prev.: +0.54%]
After Consumer Price Inflation numbers for May were a bit of a letdown just two weeks back, we should be on the lookout for a similar downside miss in analysts’ predictions about the Federal Reserve’s calculation for US Dollar inflation. Whether we see a miss in the core number (which will concern economists and macro-focused traders the most with regards to near- to medium-term recovery prospects,) or the headline numbers (which, while always more volatile, will probably result in, well, headlines in the press about stagnant inflation thereby worrying retail investors,) this data set is the week’s biggest upside risk for safe havens like gold.
FedSpeak this Week
Without The Chairman Himself taking a podium or microphone, FedSpeak will be more subdued this week than last in terms of market impact. Still, we’ll be looking to see who my join in on some of the ideas and indicators that Powell hinted at in his testimony to congress, like that the labor market returning to “full” employment as quickly as possible will be the Fed’s first target or, surprisingly, that there might be some give on the idea of negative interest rates after all.
Powell: Negative Rates Not Appropriate for U.S. 'At Least at This Time'
Is #Fed chair Powell backpedaling on NIRP?
Don't remember seeing this qualifier before
— Jared Blikre (@SPYJared) June 17, 2020
Tuesday, June 23: St. Louis Fed President James Bullard (non-voter) (1pm EDT)
Wednesday, June 24: Chicago Fed President Charles Evans (non-voter) (12:30pm)
Thursday, June 25: Dallas Fed President Robert Kaplan (FOMC voter) (9:30am)
And that’s how the week lays out for us, traders. As always, I wish you the very best of luck in your markets this week, and I’ll see everyone back here on Friday for our usual market wrap.