GoldPrice.

Good morning, traders. Welcome to our regular preview of the market week ahead, with a focus on the economic data and market narrative that are most likely to impact gold prices as well as the US Dollar and other correlated assets.

Gold prices have rallied alongside global equities since the opening of trading for the week, and trade just below $1650/oz in the spot markets this morning. Silver has risen to $14.70, and though stocks are having a strong start to the day Treasury buying continues to hold the US 10-year’s yield below 0.7%

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The rise in gold price is being assisted by a few different factors this morning. The general mood of the market seems improved as there as numbers being touted as evidence that we’re approaching a plateau in the spread of Covid-19 stateside, and that increased risk appetite is leading some buyers back into the broad commodities complex. There is also optimistic news that oil markets may be stabilizing as OPEC and Russia appear to be closing in on a peaceful agreement to reduce production. It’s not all hope and light, of course. The reality of global markets is that opportunistic investors might be taking the opportunity to buy now, ahead of another flight to safety when this morning’s optimistic narrative around the global health crisis crashes to the ground.

With both the “good” and “bad” possible outcomes in mind, let’s take a look at this week’s data calendar, which begins with the Fed.

US Economic Data to Watch

Wednesday, April 8 at 2pm EDT // FOMC Meeting Minutes

The discussion minutes released this week will cover the (second) intermeeting cut made by the Fed, on Sunday March 15, which slashed the fed funds rate by an entire percentage point to near 0%. The FOMC also announced a massive asset purchase program at the same time. In parsing the meeting notes, investors and analysts will look for information on what metrics and indicators the Fed will be looking at to judge whether or not the extraordinary efforts being made are having the desired effect of supporting the US economy through the current crisis.

Keep in mind that while the Fed’s discussion minutes are always at least a little bit stale, coming two weeks after any decisions have been made, the rapid pace of shift-and-reaction that exists in the markets currently will further date the information. It’s likely we may see some debate over whether or not it would be necessary to implement moves and operations that have already gone into effect in the days since, like the announcement that the asset purchase program will run “uncapped” to the extent that is necessary, or the alphabet soup of facilities announced to support credit flow and smaller businesses. Still, there could be some interesting detail to be found in the committee’s notes, so stay aware of possible volatility around the release.

Thursday, April 9 at 8:30am EDT // Initial Jobless Claims

[consensus expectation: +5,000k // previous: +6,648k]

We’re running the risk of getting inured to weekly jobless claims in the millions. From a sterilized economics perspective, analysts this week are looking for the outsized numbers to start coming back to earth, but they’re clearly a little wary of getting burned like last week so the estimate is still lofty. Keep an eye on this number but remember that there has been bafflingly low sensitivity to these wild numbers over the last two weeks.

Thursday, April 9 at 8:30am EDT // Producer Price Inflation (Mar)

[consensus exp.: -0.3% MoM // prev.: -0.6%]

The collapse we’ve seen in the crude oil market, passing through to downstream energy prices, will remain the dominant input in Producer Price Inflation for March, which leads analysts to predict another month-over-month decline. Core prices (excluding energy cost, and food) look to be slightly firmer than the prior month but still weak relative to recent performance and so will not be enough to fully counter the sinking prices of fuel.

One thing that will need to be watched for in this current phase, with specific regards to gold and silver pricing, is unexpected strength in inflation data. I think the dynamic is a little more relevant to consumer price inflation (although we may see the first signals of it in producer prices,) so I’ll elaborate there.

Thursday, April 9 at 10am EDT // Univ. of Michigan Consumer Sentiment (Apr)

[consensus exp.: 75.0 // prev.: 89.1]

Consumer sentiment and outlook is expected to take a big hit in the April data, dashed by the crash in equity markets as well as the staggering number of layoffs in recent weeks. I confess that I’m not sure why this week the data is released on Thursday instead of Friday as usual, but that may lead to a little more of the market’s attention being paid to how deep the measure of consumer optimism sinks. There is some upside risk to the estimate, of course. At some point, surveyed consumers will report higher confidence in the outlook, because how could things get worse?

Friday, April 10 at 8:30am EDT // Consumer Price Inflation (Mar)

[(core CPI) consensus exp.: +2.3% YoY // prev.: +2.4%]

[(headline CPI) consensus exp.: +1.6% YoY // +2.3%]

Core inflation prices are expected to take a step back as economic analysts generally anticipate the impact of the Covid-19 crisis to be deflationary. Consumer and household goods will see some upward price pressure due to stockpiling in the month of March, but that will be overtaken on net by demand shocks reverberating through airfares, new auto prices, hotel prices, Et al. The rate of all-inclusive “headline” consumer inflation will show a more dramatic slowdown, reflecting the crash in energy prices also being felt in producer costs. The price deflation will furrow some brows to be sure, but also (I have to think) pretty well priced into the market at this point and shouldn’t jostle gold and silver markets too much. But, as I mentioned when previewing Thursday’s Producer Price Inflation, we’ll want to keep an eye out for outperformance.

With the Fed firing everything it has towards supporting the economy, we could see investors jump into positions in gold as well as silver in search of a strong hedge against inflation. In one of the better case scenarios for how the current crisis plays out, should American consumers be allowed to return to “normal” activity why the central bank is still pumping liquidity and easy money into the system a “v-shaped” recovery could finally create the runaway inflation that some economists have been looking for since the Fed began raising rates again in 2015. A steady flow of re-positioning against inflation would be strongly supportive of gold prices, especially for as long as rates remain near the floor. While I think it’s unlikely we see either of these signals being sent as early as this week, the shift could be in play by the time we get to April’s data.

And that, traders, is how our next five days look ahead. As always, I wish you the very best of luck in your markets this week; I’ll see everyone back here on Friday for our regular market wrap.