Happy Monday, traders.
(Or, Happy Tuesday if you were lucky/smart enough to have Veteran’s Day off. Good for you, it’s an empty calendar for Monday anyhow.)
The economic calendar picks up a little this week vs. last, and the combinations of last Friday’s commodities rout and this morning’s unexpected bull run for the US Dollar means gold prices remain pinned around $1205/oz. Whether or not gold can hold above $1205 over the course of this next week (to say nothing of the major psychological support-level of $1200/oz) will be a major factor in how precious metals markets finish in 2018.
Let’s take a look at the data releases that could have an impact.
US Economic Data to Watch This Week
Wednesday, November 14 at 7:30am EST // Consumer Inflation
[CPI consensus expectation: +2.5% YoY / previous: +2.27%]
[Core CPI consensus exp.: +2.2% YoY / prev.: +2.17%]
This week’s read on consumer price inflation (CPI) and core CPI (CPI ex. food and energy) will be the first in a pack of US economic data expected to maintain the narrative of a stable, if not thriving, US economy. As such, these data points will likely provide a test to whatever support level gold price is maintaining at the time as it attempts to recover from last Friday’s sell-off; on the other side of the coin, a miss to the downside could easily put a dent in the US Dollar’s momentum and tip investors into risk-off assets like gold and silver.
For headline Inflation specifically: last month’s read came in below expectations following a summer of strong numbers, so this month’s report is expected to fill the gap between there and August’s 2018-high (+2.7% YoY.) Both headline inflation and Core inflation should remain pinned at the Fed’s target of “around 2%,” further solidifying odds of the next rate hike in December.
Wednesday, November 14 at 6pm EST // FOMC Chairman Powell Speaking
Speaking of the FOMC: we’re now entering the phase in between Committee meetings where it’s smart for precious metals (and Dollar) traders to be aware of public commentary coming from voting members and the Chairman especially; even with a December rate hike almost certainly in the cards.
This week, Chairman Powell will be having a public discussion with Dallas Fed president Kaplan, with an audience Q&A to follow.
Thursday, November 15 at 830am EST // Retail Sales
[consensus exp.: +0.5% MoM // prev.: +0.1%]
Similar to consumer inflation, retail sales for October are expected to recover from a downside miss in the previous month. September’s near-zero month-over-month growth in retail sales was largely attributed to after effects of hurricane season, so a rebound to 0.5% seems reasonable and fairly priced-in.
Thursday, November 15 at 830am EST // Initial Jobless Claims
[consensus exp.: +214k // prev.: +214k]
Thursday, November 15 at 11am EST // EIA Crude Oil Stock Change
While not typically an item to watch if you’re not an energy trader, crude may be at a crossroads at the moment and, as we talked about last week, the pressure oil price-action can apply to gold spot via the broad commodities complex should be taken seriously in this kind of environment.
Friday, November 16 at 9:15am EST // Industrial Production
[consensus exp.: +0.2% MoM // prev.: +0.3%]
Industrial production is honestly not a volatile number these days, but it will continue to be watched as confirmation that the US economy is, at the very least, stable.
Global Economic Data to Watch This Week
As opposed to last week, this time around we’ve got some economic releases outside of the US that are worth your attention to varying degrees; the unexpected strength we’re seeing in the US Dollar to start the week emphasizes many of these as they pertain to major USD-crosses in the Euro and Yen whose acquiescence to the greenback is boosting this morning’s bull run.
Tuesday, November 13 at 5am EST // German ZEW Econ. Sentiment Index
[consensus est.: -25 // prev.: -24.7]
The measure of analysts’ “optimism” about the economy in Germany over the next six months has been in the red and falling for several months, culminations in a massive (and unexpected) drop of more than 14 points in October. The outlook expected to stabilize this month but not improve, and as Germany is still alone in the driver’s seat of the European economy another miss to the downside could be highly problematic for a Euro already showing a great deal of weakness against the Dollar.
Tuesday, November 13 at 6:50pm EST // Japan Q3 GDP
[consensus exp.: -1% annualized // prev.: +3%]
Like the Euro, the Yen is coming into the week battered and boosting the US Dollar Index—and momentum will likely continue in that direction as annualized QoQ growth in Japan is expected to recede for only the second quarter since early 2016.
Wednesday, November 14 at 2am EST // German Q3 GDP
[consensus est.: -0.1% QoQ // prev.: +0.5%]
As we’ve talked about before, any positive sentiment for the Euro takes the majority of it’s momentum from a strong German economy. So with EUR/USD already trading below the 1.13 level to start the week, cracks forming in German growth may be what causes the damn to break. Another gap lower in the Euro would further boost the US Dollar vs. all currencies—including gold. To that end: after lining up around +0.5% QoQ for much of the last two years, experts are calling for a decline in German GDP vs. last quarter. If the Euro has failed to regain 1.13 by Wednesday morning, this could lead to another gap up in the USD.
Wednesday, November 14 at 5am EST // Euro Area Q3 GDP (2nd Est.)
[consensus est.: +0.2% QoQ // previous est.: +0.4%]
As gold traders, we’re not typically concerned with closely watching GDP prints for any given quarter after the initial estimate—these days, those economists are pretty good at getting the numbers right the first time around and little of relevance is changed in the following revisions. This time however, for reasons we’ve already discussed involving Dollar strength and Euro and gold weakness, we’ll take an interest in whether estimates of Euro Area GDP for Q3 really get cut in half and move that much closer to 0%.
That’s all for this week, traders. Check back on Friday for our recap of the week’s trading.
Good luck out there.