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 the price of gold this week and beyond, as well as market prices for silver, the US Dollar, and other key correlated assets.

Ahead of the first Fed meeting of 2022, gold markets are mostly subdued on Monday morning with spot prices trading at just a slight premium to Friday afternoon’s close

Wednesday’s Fed meeting is the unquestioned focus of this week’s economic calendar in the US, as we’ll cover below. Outside of data points and rhetoric, however, savvy traders will keep an eye on how the US Treasury market signals the investor expectations for—and reactions to—the FOMC’s perceived path of interest rate hikes as an effort to fight inflation. Last week, we saw higher yields carry somewhat less of a guarantee of lower gold prices; Until markets warm up though, we can’t just assume that trend will continue now.

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

US Economic Data to Watch

Wednesday, January 26 at 2pm EST // FOMC Interest Rate Decision

[No meaningful changes to monetary policy are expected.]

After (what is expected to be) a quiet start to the week, the focal point of the economic calendar will be the first FOMC meeting, announcements, and Chairman’s press conference of 2022. As we see the broader market of investors and analysts making more and more hawkish predictions about how the Fed will tighten up to fight inflation over the course of this year, expectations are that this meeting will be about signaling, rather than action. The current taper of the Fed’s asset purchasing program should continue at pace, and a healthy consensus expects the FOMC to be more suggestive—without outright confirmation—of a first hike in March (the soonest they could act, within the bounds of their “normal” framework.) While we’ve seen gold prices hold steady and even rally in recent weeks in the face of interest rate pressures that would typically be a negative input, it still seems most likely that such a hawkish signal about the Fed’s plans for the end of Q1 will be a serious headwind for the yellow metal. There’s likely to be more volatility around Chairman Powell’s press conference however, as the central bank will probably still do what it can, through rhetoric on Wednesday and in coming weeks, to allow themselves the room to pullback from an aggressive path in the event that economic data and conditions, other than inflation, deteriorate.

Thursday, January 27 at 830am EST // Initial Jobless Claims

[consensus est.: +260K //prev.: +286K]

While it seems to remain mostly outside of the headlines on either side of its weekly release, Initial Jobless Claims have been rising consistently since Christmas (really, since Thanksgiving,) and the last two reads have come in more than 20,000 new unemployment claims above the expected number. This recent shakiness in high-frequency labor market data shouldn’t leave a mark on the FOMC’s statement this week—although reporters might present Chairman Powell with it during the post-meeting Q&A. If the trend continues upward and starts to move back into 300K or higher, we may see greater market attention on, and sensitivity to, weekly claims as a sudden slowdown in the labor market’s recovery could put the Fed into a difficult spot while trying to cool inflation. Thought the gold market hasn’t been very reactive to this weekly data set so far in 2022, a higher Initial Claims number this week is probably bullish for gold (and vis versa.)

Friday, January 28 at 830am EST // PCE Price Index (Dec)

[(core PCE) consensus est.: +4.8% YoY // prev.: +4.68%]

[(headline PCE) consensus est.: +5.8% YoY // prev.: +5.73%]

Because the PCE report on inflation in the US economy—the Fed’s “preferred” measure of inflation—for a given month follows the release of CPI, PPI, and other key inflation prints for the same period, there’s less likelihood of a surprise (positive or negative) and market reaction because analysts have honed their modeling on fresher data. This week, however, markets will view roughly similar inflation data for December through different prism, as the PCE report comes after Wednesday’s FOMC meeting. Without knowing the shape of that lens, it would be a challenge to predict if the response in the precious metals markets (if any) would be supportive for gold or otherwise; the most useful message from Monday morning would be for gold traders to keep an eye out for increased volatility on Friday morning. 

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.