Good morning, traders; welcome to our market week preview, where we look at the economic data, market news, and headlines likely to have the biggest impact on the price of gold this week and beyond, as well as other key correlated assets.
Gold prices have handed back what was a notable overnight rally, but still maintain prices within touching distance of the pre-Thanksgiving close, as US trading begins for the week and markets descend into the final movement of 2022.
The spike in gold prices overnight appears to have been driven by reports of unrest in China that gained traction over the long weekend. As gold, as a commodity, is particularly sensitive to disruption in China, it will be wise to keep an eye on that developing story this week. In the US, the key data point this week is Friday’s November Jobs Report.
US Economic Data to Watch
Thursday, December 1 at 830 am EST // PCE Price Index (Oct)
[(core PCE) consensus est.: +5.0% YoY // prev.: +5.1%]
[(headline PCE) consensus est.: +6.0% YoY // prev.: +6.2%]
The “Fed-preferred” metrics on inflation in the US economy are expected to follow the CPI and (wholesale price-focused) PPI reports for the same period in October, showing an easing of price pressures and hinting at, finally, a peak in the eye-watering inflation of 2022. Monthly PCE numbers get somewhat light attention as it is because we’ve already seen detailed inflation data for the same time series. This month, it looks less likely to drive a real market reaction, given the odd placement in this week’s post-Thanksgiving schedule. Still, as-expected (or lower) numbers could provide a tailwind to gold prices, assuming that the data would solidify plans to ease the rate hiking cycle.
Thursday, December 1 at 10am EST // ISM Manufacturing Index (Nov)
[consensus est.: 49.8 // prev.: 50.2]
Projections are set for manufacturing PMI to slip below the 50.0 breakeven—indicating contraction in the US industrial sector—for the first time since 2020’s Covid-19 lockdowns. In that event, gold prices could be expected to get a boost from two reaction functions: one from the risk-off impulse this kind of signal of instability will pump into markets, another from the implication that the Fed may be forced to back off their tightening cycle sooner, taking some value away from the US Dollar as the safe haven preferred over gold.
Friday, December 2 at 830am EST // November Jobs Report
[(NFP) consensus est.: +200K // prev.: +261K]
[(unemployment) consensus est.: 3.7% // prev.: 3.7%]
Since coming off a peak after the summer, the Non-Farm Payrolls measure of labor market health has declines moderately. Importantly, however: it has never declined by as much as expected in a given month. This means that most of the recent monthly US Jobs Reports have come out as supportive of the FOMC continuing to walk the tightrope of tightening financial conditions in a fight against inflation while trying not complete choke-out the US economy. It means that they mostly have been positive signals for the US Dollar and headwinds for gold prices. There’s little reason to expect that risk for the yellow metal is any less this month, as even an as-expected print of around 200,000 new jobs added would still represent an objectively healthy labor market. Conversely, another better-than-expected print is likely to encourage a further USD rally.
FedSpeak this Week
The docket of public appearances by key FOMC officials is tightly packed this week as everyone gets their last looks and final words in before the blackout period preceding the final FOMC meeting of the year. The prior meeting’s minutes, released last week, outline a committee that seems ready to start slowing the pace of hikes as soon as December, so the work of Fed-watching this week will be to parse how intent the central bank may be on a hike of “only” +0.50%, and what might come next. The more dovish (suggestive of eased monetary policy) the remarks, the greater the opportunity for gold prices to gain ground higher.
Monday: New York Fed President John Williams (FOMC voter) (12 pm EST); St. Louis Fed President James Bullard (FOMC voter) (12 pm)
Tuesday: Fed Governor Lisa Cook (FOMC voter) (1235 pm); Fed Chair Jerome Powell (FOMC voter) (130 pm)
Thursday: Fed Governor Michelle Bowman (FOMC voter) (930 am); Fed Vice Chair Michael Barr (FOMC voter) (3 pm)
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.