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 prices are off their highs as US trading gets started for the week this morning, but spot prices still remain at a healthy premium to where they ended last week.
The overnight rally is being largely attributed to comments from President Biden, who is in Asia this week, that the White House will be reviewing some of the previous administration’s tariffs, not just on China but on European trade partners as well. This seemed to lead to the US Dollar resuming its steady slide from last week, and allowed gold prices some room to run. Because the move was in reaction to a comment, rather than an event or action, it’s understandable that it has retraced in the hours since, but still encouraging to see gold prices hold on to some of those gains. The Fed remains in focus this week, and releases like Wednesday’s FOMC minutes could give the Greenback a jolt that reinvigorates its rally and weigh again on the yellow metal.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Wednesday, May 25 at 2pm EDT // FOMC Discussion Minutes
The +0.50% hike to interest rates delivered by the Fed at their May FOMC meeting wasn’t any kind of surprise for the markets by the time it arrived (although we’ll recall that Fed Day was a little more dovish than expected, with Chairman Powell ruling out a massive 75bp hike anytime in the near future,) so the examination of this week’s minutes and notes from the same FOMC meeting will be less about figuring out how much debate there was about a “double” hike (very little, we assume,) and rather about what the committee sees as the up- and downside risk tolerances to continue making consecutive +0.50% hikes through the summer meetings. Gold prices will likely come under some pressure if the minutes, as we expect, point to another big hike in June; not only because expectations for higher rates traditionally weigh on the yellow metal, but also because such a data point will likely see USD moving higher against most other assets.
Friday, May 27 at 830am EDT // PCE Price Index (Apr)
[(core PCE) consensus est.: +4.9% YoY // prev.: +5.18%]
[(headline PCE) consensus est.: +6.2% YoY // prev.: +6.59%]
As has become the case more and more over the last year or so, while surprises are unlikely when it comes to the release of the PCE inflation data—the Fed’s “preferred measure” of inflation in the US economy—because it all ties in with CPI, PPI, and other price data we’ve already seen for the same time series, there’s still potential for at least a brief but sharp market reaction when the PCE report hits the transom on Friday morning. And benefit or headwind for gold prices at this point in the week will likely be tied to the path of the US Dollar Index, and with the data expected to show that inflation pressures have come off of their peak on a year-over-year basis, there could be an opportunity to see the yellow metal at least given a bit more headroom, even if it’s without any really boost higher.
FedSpeak this Week
This week’s schedule of public appearances by FOMC officials is a little sparse, but it is populated by more of the big hitters, including Chairman Jerome Powell. Fed watchers and investors will continue looking for the best clues available as to whether key committee participants will be inclined to keep hiking interest rates by 50 basis points at a time through the summer, or if they might be tempted to tap the breaks and let the US “economy” (that is, in this case, the US stock markets) have a breather.
Monday: Atlanta Fed President Raphael Bostic (non-voter) (12pm)
Tuesday: Fed Chair Jerome Powell (FOMC voter) (1220pm)
Wednesday: Fed Vice Chair Lael Brainard (FOMC voter) (1215pm)
FOMC meeting minutes the key event for markets this week. The Fed could hint dovishness for the first time in a long while, which would be bullish for #BTC
A 1-2 week long rally could be sparked by talk of - no 75bps hikes or a pause in tightening on return to neutral rates. pic.twitter.com/WuBjCc3OdH
— tedtalksmacro (@tedtalksmacro) May 23, 2022
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.