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.
Precious metals prices were pummeled again in the overnight sessions ahead of Monday’s US trading, as the risk-on sentiment that dominated markets end-to-end last week continued to roil the commodities space after the global re-open. While the primary markets for risk, equities in developed Asian and European economies, were somewhat mixed overnight, investors were eager to cash out of their gold positions in a reach for yield; the yellow metal shed more than $15/oz while silver spot prices briefly fell below $22/oz.
In the first hour of US trading, the American benchmark indices have weakened (but still look positioned to make November the strongest month for the Dow in more than 30 years) as investors cash in some profits ahead of the end of the month. This is allowing gold prices to consolidate a bit around $1775/oz, heading into the market week.
The biggest attention-grab comes on Friday with the November Jobs Report, but between a middling slate of economic data and the ever-present threat that the steadily worsening resurgence in coronavirus around the globe will squash the market optimism of recent weeks, there’s plenty of chances for the precious metals’ charts to be in a meaningfully different place by the time we get to see Non-Farm Payrolls.
With that in mind, let’s look at the week ahead.
US Economic Data to Watch
Tuesday, December 1 at 10am EST // ISM Manufacturing Index (Nov)
[consensus exp.: 57.8 // prev.: 59.3]
Last week’s surprisingly strong data on US economic activity (in both the manufacturing and services sectors) from Markit IHS sent the first jolt of risk-on optimism in the US trading week that saw safe havens broadly sold off in a reach for risk and yield. This week, investors and analysts will be looking for the ISM data to confirm the acceleration. ISM actually reported a big beat in October’s data (hence the minor step down expected on Tuesday,) so I would certainly expect market sentiment to celebrate another strong performance and possibly push safe havens, like gold, immediately lower; Particularly if the number goes north of 61.0.
Wednesday, December 2 at 815am EST // ADP Employment Report (Nov)
[consensus exp.: +440k // prev.: +365k]
A lot of eyes will be on this Friday’s November Jobs Report, which means there will also be some extra attention paid to the mid-week private payrolls data even though there’s no direct correlation (as evidenced by October’s divergence.) While Wednesday’s ADP number won’t actually influence the non-farms payroll print at the end of the week, a number notably above or below expectations could certainly drive market reactions, at least in the immediate term. Based on investors’ and markets’ attitude over the last week, we would expect a beat to apply more pressure to gold’s chart, while gold could find some new buyers in the event of another downside surprise.
Thursday, December 3 at 830am EST // Initial Jobless Claims
[consensus exp.: +765k // prev.: +778k]
Initial claims have risen—against analysts’ expectations—for two consecutive weeks. Even a third increase probably doesn’t move markets directly this week, but it will keep pushing the 4-week average higher as well; Next week, following Friday’s NFP number which is expected to be unimpressive, these weekly tics higher may start rattling investors sentiment more immediately.
Thursday, December 3 at 10am EST // ISM Non-Manufacturing Index (Nov)
[consensus exp.: 56.1 // prev.: 56.6]
Service sector activity has been less expansionary over the last six to eight weeks than manufacturing in the US, and with a new surge of Covid-19 fears and infections, and a new round of preventative lockdowns, the “non-manufacturing” businesses in the US may be slowing down again. This seems to be a view generally shared between analysts and investors at the moment, so I strong upside surprise (as with last week’s Markit PMI) could certainly boost risk appetite again and see a similar market response; But I mostly expect this (and other data points in coming weeks) will drive a correction from last week’s exuberance.
Friday, December 4 at 830am EST // November Jobs Report
[(NFP) consensus exp.: +500k // prev.: +638k]
[(unemployment) consensus exp.: 6.8% // prev.: 6.9%]
A handful of factors that impact the pace of jobs gained or lost in the American economy—all of which are currently applying negative pressure—are likely to come to bare on the November NFP number. From initial jobless claims creeping higher, to the rolling-off of census jobs and the grim reality of thousands of Americans who, having lost their jobs in spring’s lockdowns, will phase out of eligibility for unemployment benefits; the simple expectation for this month’s jobs report is for a worrying deceleration in the labor market’s contribution to the already weakening US economic recovery.
While a week ago I would have felt comfortable saying that this bummer of a number was probably well priced into the markets for safe haven assets, with the steep fall gold has taken in the last 10 days I do think there will be room for the yellow metal to move higher as investors and markets react to what’s expected to be a concerning assessment of the US economy’s health. That’s assuming, of course, there’s not any kind of major event mid-week that dramatically shifts market positioning. I’m not calling for a rally in precious metals on this data, and there’s certainly the possibility that it could outperform expectations. But I would recommend keeping an eye out for this release at the end of the week, which has a higher potential than usual to swing metals and Dollar trading.
FedSpeak this Week
There isn’t much of a crowd on this week’s schedule of public appearances/comments from FOMC officials, and among the smaller group there are only a few items (listed below) that warrant much attention ahead of time. On the heels of last week’s FOMC meeting minutes, Chairman Powell and/or NY President Williams will likely be offered some more specific questions about the likelihood of the committee adjusting guidance on their (theoretical) plans to pare-back asset purchases, as well as their views on how the incoming Biden administration’s economic team is shaping up. Regardless of what’s asked, we can expect both Powell and Williams, the Fed’s two heaviest hitters, to continue publicly pushing the Federal government to inject meaningful fiscal stimulus back into the US economy, before it’s too late.
Tuesday: Federal Reserve Chairman Jerome Powell (FOMC voter) (10am EST)
Wednesday: Chairman Powell (10am EST); New York Fed President John Williams (FOMC 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.