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 other key correlated assets.
Gold prices are again starting the week on the back foot, as the market reaction to las week’s FOMC announcements has continued at pace: the US Dollar Index is near 20-year highs on Monday morning and Treasury yields continue to soar.
One positive note for gold at the start of the week as been continued support for the yellow metal around $1860/oz. This week’s key data point will be the release of consumer inflation data for the month April, which is expected to show some deceleration from the month prior. It is a signal that could offer some resistance to the recent bull run of the Dollar, and some relief to gold positions (at least in the near term.)
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Wednesday, May 11 at 830am EDT // Consumer Price Index (Apr)
[(core CPI) consensus est.: +6.0% YoY // prev.: +6.5%]
[(headline CPI) consensus est.: +8.1% YoY // prev.: +8.5%]
Since just before the Fed’s first rate hike in March, there’s been a common expectation that the FOMC will vote to raise interest rates by either 25 or 50 basis points at every remaining meeting in 2022; but the Fed certainly has not confirmed that in any sort of forward guidance, so investors and managers will be trying to read the tea leaves to project the likelihood that interest rates rise again in the next meeting or so. (For example, we remain relatively confident that there will be a rate hike in June, but less certain.) It will be interesting, then, to see how gold and other Dollar-tied assets react to top-tier economic data like this week’s inflation read. We saw evidence last week that any indication that the Fed might not act as aggressively as possible is a boon to gold price, as well as to the US stock market (on Wednesday, the sentiment had sent gold’s spot price on a path back to $1900/oz.) An as-expected CPI number this week—one that furthers the narrative that March’s data represented a “peak” in the post-pandemic inflation surge—would fall into this category.
Thursday, May 12 at 830am EDT // Initial Jobless Claims
[consensus est.: +190K // prev.: +200K]
From last week’s FOMC meeting and the press conference that followed, Fed Chair Jerome Powell again emphasized how vital it is for the US’ labor recovery to remain strong, as it provides some degree of cushion and cover for the Fed to cool economic activity in an effort to lower inflation. As far as the higher-frequency employment data goes, economists and observers will hope to see Initial Claims remain below 200,000 each week. Should this number start to rise, especially enough to lift the four-week running average, we might see gold prices starting to move higher both through the suggestion that the Fed may have to break its pace of rate hikes, and the basic function of fearful investors moving towards safe havens.
FedSpeak this Week
The most interesting public engagements from Fed officials this week are clustered to Tuesday’s diary; there are others scheduled this week, but we’re keeping our list to the most relevant. Investors and Fed watchers will try to pick up hints about where the levers are around key data (like Wednesday’s CPI release) that will drive the central bank to either hike by 0.50% at each of this summer’s meetings, or by “only” 0.25% at some point.
Tuesday: New York Fed President John Williams (FOMC voter) (740am EDT); Fed Governor Christopher Waller (FOMC voter) & Minneapolis Fed President Neel Kashkari (non-voter) (1pm); Cleveland Fed President Loretta Mester (FOMC voter) (3pm); Atlanta Fed President Raphael Bostic (non-voter) (7pm)
Friday: Minneapolis President Kashkari (11am); Cleveland President Mester (12pm)
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.