Good morning, traders. Welcome to our weekly look at the macroeconomic calendar for the precious metals and Dollar markets.
At the time of writing this morning, gold and silver prices are markedly softer; having sold lower throughout overnight trading following a sharp gap higher at the weekly open, which was quickly faded by sellers.
It’s a bit of an odd trade, from my perspective. The global stories that drove a largely risk-averse mood last week, like the unrest in Hong Kong and the further unraveling of the UK’s latest Brexit regime persist. Meanwhile, more anemic German data is keeping the picture of the European economy concerning if not outright bleak while geopolitical tension is flaring up again near the Middle East. Even US-China trade headlines, which have often been the source of irrational optimism for risk-on trades, are gloomy this morning as the two sides seem disconnected ahead of face-to-face talks.
All that, and many traditional safe haven assets are well lower to start the week. Hm.
While we’re seeing gold spot prices make a move back higher towards $1500/oz at the US market open and silver has moved back above $17.50, this weakness (in precious metals, specifically) looks to me like a bit of technical exhaustion combined with would-be buyers unsure of where to step in. That could mean this week ends up being a pivot point as we head toward the year’s end: will the appetite for risk be strong this week and push prices further below $1500; or will uncertainty take hold and drive positions back into safe havens?
FedSpeak This Week
The reads we’ve been getting from now two weeks of commentary from Fed officials following September’s rate cut have been underwhelming to say the least. It’s not that the FOMC members have nothing to say, but both the traditional hawks and established doves seem to be sticking to their guns; all that really tells us as observers is that the committee really does seem divided over its next move (and, at a more basic level, its responsibilities)—more so than it has been in quite a while.
The real showpiece will be Wednesday’s FOMC meeting minutes; ever the optimist, I think the release of the committee’s discussion details and the transparency it implies will force a little more candor out of this week’s public comments from officials. To that end, here are the scheduled remarks I think are worth having on the radar:
Tuesday, October 8: Chicago Fed President Charles Evans (FOMC voter) (1:35pm EDT); Fed Chairman Jerome Powell (voter) (1:50pm), Minneapolis Fed President Neel Kashkari (non-voter) (5pm)
Wednesday, October 9: Fed Chairman Powell & Kansas City Fed President Esther George (voter) (10:30am)
Thursday, October 10: Cleveland Fed President Loretta Mester (non-voter) (5:30pm)
Friday, October 11: Minneapolis Fed President Kashkari (8am); Boston Fed President Eric Rosengren (voter) (1:15pm)
US Economic Data to Watch
Tuesday, October 8 at 8:30am EDT // Producer Price Index (Sep)
[consensus expectation: +0.1% MoM // previous: +0.1%]
The US “producer prices” variant of inflation will likely never carry the same weight as CPI in judging the level of inflation in the American economy, but at least it can serve as a brief leading indicator ahead of Thursday’s inflation data. To that end, the expectation that still-low energy prices and general commodity softness (as gold traders well know from September) should see producers’ inflation up a modest 0.1% this month is broadly in line with consumer inflation remaining on pace as well.
Wednesday, October 9 at 2pm EDT // FOMC Meeting Minutes
While September’s FOMC rate cut and the committee’s statement, on the surface, were pretty nearly copies of the July meeting, it was in the quarterly Summary of Economic Projections that we saw a clear split among the members on the appropriate path ahead. A look at the minutes for that meeting will tip us to just how contentious that division may be and may give us some idea of which voters could be compelled by the right economic data to switch sides.
With last week’s ugly PMI data, I’ll also be particularly interested in any clues as to when (or if) negative manufacturing sector data could compel the Fed to act again despite at-target inflation and a strong labor market.
Thursday, October 10 at 8:30am EDT // Consumer Price Index (Sep)
[headline CPI consensus exp.: +1.8% YoY // prev.: +1.7%]
[core CPI consensus exp.: +2.4% YoY // prev.: +2.4%]
Like I mentioned above, the market broadly expects consumer inflation to remain on-pace this month and from a rate path perspective that counts as a win for the FOMC voters who would argue that the Fed now needs to go on hold and let July and September’s rate cuts do their work. The underlying price data for September supports this, as well as the seasonal inputs for this time of year. Because last month’s uptick in core CPI was bigger than expected, there’s always a risk that we could see a revision lower or a softer set of September data which would drive rates lower and (presumably) gold prices higher; but if Tuesday’s PPI arrives in-line I think that severely cuts the odds of a surprise on Thursday.
Thursday, October 10 at 8:30am EDT // Initial Jobless Claims
[consensus exp.: +218k // prev.: +219k]
Friday, October 11 at 10am EDT // U of Michigan Consumer Sentiment (Oct)
[consensus exp.: 92.0 // prev.: 93.2]
Consensus is for a slight pull-back from the final score on Consumer Sentiment from September, but I wouldn’t be surprised to see a print close to 93.0 again given the way that it was trending upward to end last month. In my opinion, the market’s sensitivity to this data is heavily weighted to the downside currently—because everyone is watching to see where the trade war with China is applying pressure to the US economy, I think any growing sense that the American consumer is feeling that pain would drive investors further into (non-USD) safe haven assets like gold.
And that’s how the week looks, traders; a quieter calendar but we know well from the last few weeks that there’s plenty of potential for fireworks in the markets, nonetheless. I wish you the best of luck out there, and I’ll see you back here on Friday for a recap of the week.