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.
Gold prices on Monday morning are trading slightly below the opening marks from Sunday evening. Despite finding some lift during the overnight sessions, primarily in the morning hours of European markets, that took spot prices as highs as $1810/oz before softening, the start to the US trading week has been crowded with resistance for the yellow metal. An early morning rally in Treasury yields, which accelerated after a disappointing New Home Sales report, appears to have been the strongest headwind in correlated markets.
After seeing gold prices last week sliding lower when lacking any kind of directional input, the week ahead brings a more active schedule and a few more opportunities for the yellow metal to at least stabilize above $1800/oz before markets become more active at the end of the summer.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Wednesday, July 28 at 2pm EDT // FOMC Interest Rate Decision
[No changes to key monetary policies expected.]
July is about as “dead” as a Fed meeting can get while the US economy is in the middle of a recovery effort: Chair Powell has already made a handful of public appearances at which he addressed the most recent inflation data, and there’s virtually zero chances of a shift in policy or guidance this week. The consensus view continues to see Powell & Co. (most likely) next month formally adjusting guidance (that is “warning” the market) about tapering before starting the pull-back at the end of the year. Although the FOMC’s (lack of) decisions will have little immediate market impact, observers and analysts will watch Powell’s Q&A press conference for sides of confirmation that the market’s projection of the Fed’s tapper schedule is accurate. For gold markets, the stakes are pretty clear at this point: Confirmation that forward guidance will change in August should build some resistance against the yellow metal as it signifies a step—however miniscule—towards the Fed’s next rate hike.
Thursday, July 29 at 830am EDT // US GDP Growth (Q2) (1st Est.)
[consensus est.: +8.5% QoQ // prev. (Q1): +6.4%]
The story of the US economy’s second quarter, even before you can get to talking about inflation, was an unprecedented surge in demand and spending post-vaccine. This spike in activity—both on the consumer side, and from business trying to keep up—is expected to add another 2% (QoQ) to US economic growth in Q2’s data. This would verify that the post-pandemic recovery still looked healthy going into the summer, and the reopening/reflation trades may get another boost from investors as a result, pushing US equities higher; There’s no guarantee that gold prices would be lifted as part of the trade as well; But it’s certainly possible and worth keeping an eye on.
Thursday, July 29 at 830am EDT // Initial Jobless Claims
[consensus est.: +380K // prev.: +419K]
Last week’s unexpected pop in the number of new unemployment claims was the lone flashpoint for gold prices (and other risk-tied assets) in the second half of last week, lifting gold prices slightly higher via some combination of risk-aversion and a tenuous implication that the Fed’s ultimate plan for lift-off after a labor market recovery could be delayed further. Investors will be wary this week and less likely to be caught in another rush to adjust. While there’s little reason to expect an immediate market impact it will be important to track whether last week’s pickup was an aberration or the first signal that the US recovery is headed for a stall.
Friday, July 30 at 830am EDT // PCE Price Index (June)
[(core PCE) consensus est.: +3.7% YoY // prev.: +3.39%]
[(headline) consensus est.: +4.0% YoY // prev.: 3.91%]
As with Thursday’s labor market data, investors and observers will be more guarded ahead the Federal Reserve reporting its own measurements of inflation for the month of June, as participants were already (somewhat) surprised by a modest increase in both core and headline CPI in June (as reported two weeks ago.) The Fed also used CPI as an input for its PCE calculations as well, so the acceleration looks to be accounted for in consensus estimates. This will still be, as usual, a data point with concentrated market focus, and so it’s possible we’ll see some pockets of investors reacting as if they haven’t already seen inflation data for this period: In that event, there may some upward momentum for gold prices on Friday morning thanks to the metal’s tradition role as an inflation hedge. Longer term, we’ll be looking into the PCE metrics for points that either confirm or question the Fed’s call for the current pop in inflation to pass before forcing monetary policy to react.
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.