GoldPrice.

Good morning traders, welcome to another week in the markets.

We’re off to an energetic start to the week, after the mild quiet of Sunday evening and overnight trading was broken by the news of China’s trade retaliation which has sunk the Dollar and US Equities and lifted gold prices more than $10 at time of writing.

US-China Trade Conflict

This week’s major caveat observator is, of course, the ongoing trade tension between the world’s two largest economies. Is it trade talks? A trade war? Or is it even a trade kerfuffle, and which network will be brave enough to put that on its lower-thirds?

Regardless, we already see this morning how big an impact the news-flow from this particular story can have gold markets: with the confirmation this morning that China will retaliate by increasing tariffs on $60 billion in US goods, the US stock markets have opened sharply shower and the US Dollar is taking a beating while gold has risen above$1295/oz and may be eying another run at $1300. Without any top-tier data on the calendar for this week, every economic release will be subordinate to the US-China headline and so your planning and trading for the week should be viewed through that lens.

The immediate pressure that this kind of macroeconomic news puts on the US Dollar does imply higher gold prices as we have this morning. In fact, Goldman Sachs has a note out this morning confirming that, from their view, there will be a lasting negative effect on the US economy the longer this goes on:

GOLDMAN: new academic evidence on tariffs “points to larger effects on US consumer prices than we had previously estimated .. the costs of US tariffs have fallen entirely on US businesses and households, with no clear reduction in the prices charged by Chinese exporters” pic.twitter.com/MbcSs26Uhc

— Carl Quintanilla (@carlquintanilla) May 13, 2019

However, as we’ve been saying for most of this year, the number of potential crosswinds involved in this narrative—namely the negative impact that a weakening Chinese currency can have on gold prices despite an also-weaker Greenback—make it hard to divine just how gold prices will react.

#Gold breaks higher with focus now on $1297, $1307 and $1316 (Fibo of the Feb. to April sell-off) https://t.co/2u6JoJv801

— Ole S Hansen (@Ole_S_Hansen) May 13, 2019

As a trader, staying informed will be your best weapon and your best defense in this environment, so keep an eye on our updates this week.

For now, on to the calendar.

US Economic Data to Watch

Wednesday, May 15 at 8:30am EDT // Retail Sales (Apr)

[headline consensus expectation: +0.2% MoM // previous: +1.6%]

[ex. autos consensus exp.: +0.7% MoM // prev.: +1.2%]

Data has implied that auto sales were markedly weaker in April, which is expected to be the cause of nearly flat retail growth month-over-month; monitoring the ex. autos number for a bigger pop will confirm that.

For the moment, I don’t think there’s a great deal of pressure from gold or US Dollar traders for the monthly retail number to come in-line so it will take big up- or downside surprises to have a sustained effect on prices. Gold might catch a bid if any of the ex. autos readings are closer to flat or even negative month-to-month; conversely, a much stronger than expected headline number will weigh on gold prices.

Wednesday, May 15 at 8:30am EDT // NY Empire State Manufacturing Index (May)

[consensus exp.: +8.0 // prev.: +10.1]

This particular measurement of the US manufacturing sector has shown some mild signs of life after a sharp decline in the last quarter of 2018, but with other indicators struggling and given that we’ve seen pronounced moves in gold price driven by poor performances in this reading, it will remain worth keeping an eye on.

Wednesday, May 15 at 9:15am EDT // Industrial Production (Apr)

[consensus exp.: flat MoM // prev.: -0.1%]

The Federal Reserves measurement of Industrial Production is has been one of the underperforming manufacturing metrics this year; analysts and US Dollar traders are this month just hoping it can raise its chin off the floor.

I don’t know what, other than an outrageously strong number (>1% maybe?) would provide a real boost to the Greenback, but a second consecutive sub-0 print would have to be Dollar-negative enough to give gold prices a lift.

Thursday, May 16 at 8:30am EDT // Philadelphia Fed Manufacturing Index (May)

[consensus exp.: +9.0 // prev.: +8.5]

Thursday at 8:30am is going to be busy but without any real important data on the ticker, so the noise will make it hard to point to specific drivers for any price action around that time. As I’ve said though, there’s a lot of focus on the health of the US manufacturing sector so we’ll have an eye on the Philly Fed gauge.

Thursday, May 16 at 8:30am EDT // Housing Starts (Apr)

[consensus exp.: +6.2% MoM // prev.: -0.3%]

Housing Starts should be a mildly positive release this week, as still-lower mortgage rates and better weather ought to pass-through to an improvement on the prior month. Do keep last month in mind though: we saw that a disappointment in this data set can boost gold prices.

Thursday, May 16 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +220k // prev.: +228k]

Seems like this number is getting a little boring again. Same rules still apply: much higher than expected claims typically means gold prices rise, at least temporarily, and vis versa.

Friday, May 17 at 10am EDT // University of Michigan Consumer Sentiment (May)

[consensus exp.: 97.5 // prev.: 97.2]

A quiet calendar week will end with a quiet Friday, but U of M’s Consumer Sentiment reading is always worth keeping on your radar for large upside (gold price down) or downside (gold price up) shocks.

Global Economic Data to Watch          

Wednesday, May 15 at 2am EDT // Germany GDP (Q1)

[consensus exp.: +0.4% QoQ // prev.: flat]

We saw last week how signs of improving growth in Germany, as the workhorse economy of the EU, can provide a positive boost to the EUR currency which can lift gold prices (against the Dollar) with it. With some degree of improvement expected over Q4 growth, we may see similar action in the early hours of Wednesday morning this week.

FedSpeak This Week

If I’m being honest, I don’t expect much of any importance to come from Fed official’s public comments this far removed from a non-event meeting and this far ahead of the next statement. Still, on some weeks I can’t help but notice how many officials are slated to make appearances in a given week and I feel obligated to at least point out the ones with more “potential”:

• Tuesday, May 14 at 12:45pm EDT // Kansas City Fed President Esther George (voter)
• Tuesday, May 14 at 6pm EDT // San Francisco Fed President Mary Daly (voter)
• Thursday, May 16 at 12:05pm EDT // Minneapolis Fed Pres. Neel Kashkari (non-voter)
• Thursday, May 16 at 12:15pm EDT // Fed Governor Lael Brainard (voter)

And that, traders, is how the week lays out before us. I wish you the very best of luck in the markets this week, and I’ll look forward to seeing you back here on Friday for our detailed recap of the week.