GoldPrice.

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 on 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 have shaken off an initial downturn overnight and are starting Monday morning roughly level to Friday afternoon’s close. While far from a certainty, this could bode well for the yellow metal’s momentum in any effort to regain previous support at $1800/oz. 

The Jobs Report due Friday is the focal point of this week’s calendar. Economists expect a soft number, mostly because the assumption is that January saw the Omicron covid surge leave its biggest mark on US economic activity, but also because the first NFP in a given year is usually a lower print. There are plenty of trading hours between here and Friday morning and, while the economic calendar doesn’t have any other top-tier events, expect investors and managers around the globe to continue working through their reaction to last week’s hawkish FOMC announcements; A repeat of last week’s dramatics in the equity markets could pass through to volatility in the gold market as well. 

For now, let’s take a look at the rest of the calendar ahead. 

US Economic Data to Watch 

Tuesday, February 1 at 10am EST // ISM Manufacturing Index (Jan) 

[consensus est.: 57.5 // prev.: 58.7] 

Given that new Jobs Report is due at the end of the week, we see it as unlikely that gold and our other relevant markets will have a strong, sustained reaction to either Tuesday’s manufacturing PMI number or to the service sector variant on Thursday. Still, it will be worth tracking the manufacturing report to see if it also reflects a sudden slowdown from the Omicron variant surge, an effect that has been very evident in recent regional manufacturing surveys. The reaction function for gold price should be pretty standard here: the less impressive the PMI number that comes out, the more risk-off tailwinds there could be for the gold chart, while the opposite holds true for a strong PMI read. 

Wednesday, February 2 at 815am EST // ADP Employment Report (Jan) 

[consensus est.: +200K // prev.: +807K] 

We saw last month how a very strong ADP number doesn’t directly translate to a similar performance in the more important non-farm payrolls data that comes later in the same week. To be sure, however, this has never stopped investors in the Dollar (and highly Dollar-sensitive assets like gold) from reacting to big beats or misses in the Wednesday report on private payroll growth; So from here, we’ll issue our monthly note that traders should be on the lookout for volatility when ADP hits the wires on Wednesday morning. 

Thursday, February 3 at 830am EST // Initial Jobless Claims 

[consensus est.: +250K // prev.: +260K] 

As noted last week, the higher-frequency labor market data since the last months of 2021 has shown a frustrating trend of moving higher most weeks whether analysts expect it to or not. Initial Jobless Claims will probably not get much attention this week, as it usually the case when it’s being overshadowed by a monthly Jobs Report. But if the Fed’s policy path for the first half of the year—and the market’s willingness to go along with the tightening of monetary policy at a fast clip—does depend on the US economy coming out of the stress created by winter’s Covid surge, it will be important to see labor market data in February making a quick improvement. 

Friday, February 4 at 830am EST // January Jobs Report 

[(non-farms payroll) consensus est.: +150K // prev.: +199K] 

[(unemployment) consensus est.: 3.9% // prev.: 3.9%] 

The headline for expectations for January’s Jobs Report (which can be, and have turned out to be, inaccurate) is that economists and the market are generally expecting some weak numbers, as it’s presumed that the latest Covid surge (as we’ve already covered) will leave its biggest dent in January’s data. January tends to be a weaker month on average for counting new jobs added to the US economy, so markets may not feel as disappointed or unsettled as they were by a big miss last month; that said, there’s always the possibility that the real NFP number this time could miss badly enough to go negative (as some desks are projecting, in fact.) On the other hand, there’s a lot more room for a positive surprise. 

As we’ll have to reckon with at least until the March FOMC meeting and probably for some time after: The trick to projecting how an asset like gold might move in response to Friday’s Jobs Report is not just estimating investors’ reaction to the most likely outcomes, but also trying to project how such an important data point might impact the Fed’s assessment of its policy path for 2022 (and how it might impact investors’ projections for the Fed.) For labor market data at present, both gold’s traditional reactions and its reaction to Fed function seem aligned. A let down on Friday’s NFP print is more likely to push uncertainty into the market, which tends to benefit gold, while also raising a question (however unlikely the central bank seems to be to mind it) about whether the Fed might need to be sleep aggressive. A beat this week is presumed to be bearish for gold, as the data itself likely would lift the Dollar higher while brightening the Fed’s green light to hike in March. 

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.