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.
Following a large gap higher as global markets re-opened, investors and markets around the world first had an opportunity to express their reaction to the weekend’s events in the Russian invasion of Ukraine, gold spot prices have regained the $1900/oz level that seemed so unstable at the end of last week.
Although the yellow metal’s gains have tailed-off since the initial spike, gold has done some consolidating through the European morning and may be setting up support around $1910. With the world’s 11th largest economy appearing on the brink of collapse, a mood of uncertainty and risk-aversion will likely permeate markets again this week. And with the news that Russia’s banks will be cut off from a key mechanism of the global financial system—slashing the Russian central bank’s transactable reserves down to its positions in CNY and a sizable treasury of physical gold—there may be a number of headlines that could create reasonable tailwinds for gold.
For now, let’s take a look at the rest of the calendar ahead.
US Economic Data to Watch
Tuesday, March 1 at 10am EST // ISM Mfg. Index (Feb)
[consensus est.: 58.0 // prev.: 57.6]
Headline survey data on the health of the US industrial sector has been tailing-off moderately in recent months, most as a result of the “omicron surge” in Covid in the US and around the world that began late last year. Economists are looking for the first step higher in February’s data, as the virus’ heaviest effects on productivity seem to have waned once again (for now.) Watchers will also keep an eye on the imbedded assessments of supply price inflation as a bellwether for inflation possibly cooling again in the broader economy.
Wednesday, March 2 at 815am EST // ADP Employment Report (Feb)
[consensus est.: +375K // prev.: -301K]
January’s “jobs week” was a great example of the unreliability of a (directional) correlation between ADP’s read on private payroll growth and the overall Non-Farm Payrolls number reported for the same time period: Last time, a big downside miss on the ADP number—one that reported contraction rather than any growth at all—was followed up by a door-buster of an NFP. That lack of direct correlation certainly didn’t forestall a jump in trading volatility around gold spot prices and other markets following the ADP print; and that’s why we include this every month in the preview for Jobs Week - because gold traders would be smart to be aware of possible volatility around this data point, even if it shouldn’t seriously alter their outlook for Friday’s numbers.
Thursday, March 3 at 10am EST // ISM Services Index (Feb)
[consensus est.: 61.0 // prev.: 59.9]
Similar to the PMI for the manufacturing sector (refreshed on Monday, and discussed above,) service-sector PMI dropped in the months since the autumn of 2021, although this slide was even steeper as the greater number of American’s staying home tends to put a bigger block on the non-manufacturing side of the US economy. Here again, analysts are expecting to see the start of rebound as the data rolls farther away from the time series that were marred by the most recent Covid surge.
Friday, March 4 at 730am EST // February Jobs Report
[(NFP) consensus est.: +450K // prev.: +467K]
[(unemployment) consensus est.: 3.9% // prev.: 4%]
January’s Jobs Report, which caught most of us off guard by not only bringing its NFP number in well above expectations, but also reporting meaningfully higher revisions to the data from November and December, seemed to lock in the March FOMC hike. As inflation numbers have remained elevated in the weeks since, it seems like Friday’s NFP and unemployment data will be one of the most inert we’ve had (in terms of influencing monetary policy) in several months—Baring the unlikely event of a sharp reversal of last month’s print (a major disappointment and possibly a walking back of January’s strong improvements) that could make the Fed more reluctant to act aggressively this month. This may be positive news for long gold positions at the end of the week, as that out-of-the-blue disappointment would likely be a buy signal for the yellow metal (however much commodities are reacting to anything other than headlines out of Ukraine at that point,) while an as-expected print (or better) probably won’t be enough to imply a more hawkish path for the FOMC in the weeks ahead.
FedSpeak this Week
As we barrel towards the March Fed meeting which, for now, is still expected to announce the first in a new cycle of interest hikes from the central bank, attention on communication from key FOMC members will only heighten.
The war that Russia started in Eastern Europe last week will be a new point of emphasis for Fed watchers: Given the downward pressure that the conflict is putting on global equity markets, investors and analysts will be trying to parse for clues to whether the FOMC might be more hesitant to take uncommonly aggressive steps (like hiking rates by 0.5% in one go) at the March meeting.
Monday: Atlanta Fed President Raphael Bostic (non-voter) (1030am EST)
Tuesday: Bostic (2pm); Cleveland Fed President Loretta Mester (FOMC voter) (2pm)
Wednesday: Chicago Fed President Charles Evans (non-voter) (9am); St Louis Fed President James Bullard (FOMC voter) (930am); Fed Chair Jerome Powell’s semi-annual congressional testimony (10am)
Thursday: Chair Powell’s congressional testimony continues (10am); New York Fed President John Williams (FOMC voter) (6pm)
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.