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.
With a big week ahead, gold prices are showing some upward momentum this morning as Treasury yields soften and the US Dollar slides back from last week’s strong finish.
It’s a healthy start for the yellow metal, but markets may be generally subdued to start the week as investors largely sit on their hands ahead of Wednesday’s FOMC meeting, from which the central bank is expected to announce the start of its taper. There are other points of interest pre- and post-FOMC as well, including updated ISM numbers and the October Jobs report on Friday.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Monday, November 1 at 10am EDT // ISM Mfg. Index (Oct)
[consensus est.: 60.5 // prev.: 61.1]
The supply-side constraints and logistical hiccups that are contributing to higher inflation around the world are expected to continue weighing against the growth of manufacturing activity in the US, although, by the looks of the recent and projected numbers, it isn’t a major stressor at this time. Analysts are expecting a pull-back in activity from last month, but a print above 60.0 would keep the index around the highest levels of the last five years.
Wednesday, November 3 at 815am EDT // ADP Employment Report (Oct)
[consensus est.: +400K // prev.: +568K]
The relevance of ADP’s monthly data on private payroll growth, for gold (or Dollar) traders, typically comes down to being aware of the print and expectations for it, as markets can get briefly volatile if the actual number is considerably better or worse than the consensus. (In the current paradigm, “better” has been a bearish input for gold, while the yellow metal tends to catch a boost if the number falls short.) The signal might be a little muddier this week, with the number coming just hours before the Fed’s expected taper announcement; so, even in the projection is a bit off-center the market reaction may be light as investors sit still.
Wednesday, November 3 at 10am EDT // ISM Services Index (Oct)
[consensus est.: 62.0 // prev.: 61.9]
The services sector of the US economy, despite feeling a pinch in the big-ticket side (airfare and other travel activities) during the summer Delta surge, isn’t facing the same pressure from supply-chain chaos as the manufacturing sector. It’s reasonable, then, that analysts are looking for the ISM Services number to have edged higher in October. As with other Wednesday data, it’s tough to expect much of a market reaction this time around because a lot of investors—certainly those in the Dollar and gold markets—will be watching the clock wind down towards the Fed’s announcement.
Wednesday, November 3 at 2pm EDT // FOMC Interest Rate Decision
The process of tapering the Fed’s current program of asset purchases (a form of monetary policy support for the recovering US economy) is expected to begin following the Federal Reserve’s FOMC meeting and announcements this Thursday afternoon. Although the central bank may spend a lot of energy trying to de-link the two actions over the next several months, investors as a body are programed to assume that a Fed taper will lead directly into the Fed’s first rate hike sometime in 2022. Because of this, there may be some volatility for gold prices (mostly downside pressure) at the announcement even though this has been priced into the markets for weeks.
One point of uncertainty to look out for just past the headline announcement: How clearly Powell and the FOMC will lay out their schedule for the taper at this meeting. The current consensus seems to expect the process to complete in the summer of 2022, but the Fed may choose to lay out a faster, slower, or more flexible path; or may choose not to be that specific just yet. In the same vein, we’ll be looking to Chairman Powell’s Q&A for any insight on what risks the Fed sees to their plans. From this position, it’s difficult to anticipate how the Dollar or gold prices might react to certain rhetoric. Best to just be prepared for some volatility into the close.
Friday, November 5 at 830am EDT // October Jobs Report
[(NFP) consensus est.: +450K // prev.: +194K]
[(Unemployment rate) consensus est.: 4.7% // prev.: 4.8%]
From a markets perspective, this Friday’s Jobs Report might be “a weird one,” to use a highly technical term. The monthly NFP print has been key to assessing and projecting the Fed’s next move since the summer, but by the time October’s data arrives we’ll already (presumably) have seen the FOMC kick-off a taper. Depending on what risks to their outlook Chairman Powell lays out during his post-meeting Q&A, investors could remain sensitive to the key data for the labor market recovery in the months ahead; it’s just tough to tell that from a seat on Monday morning.
As far as the numbers are expected to look: Economists and analyst are again looking for a rebound from recently weak numbers, and eventually they’ll have to be proven right. Given the weak showings of August and September, an additional 400K to 500K jobs added to the US economy last month seems like a reasonable expectation, and a print like that might be a negative input for gold prices if the markets are active on Friday.
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.