GoldPrice.

Good morning, traders. Welcome to our preview of the economic calendar this week, with a focus on the data and news stories that could have the greatest impact on gold, the US Dollar, and correlated assets.

Gold prices have exploded higher again to start the week, as the weekend brought worrying spikes in the number of confirmed Covid-19 infections in regions well outside of China. The yellow metal settled from its initial surge to trade steadily around $1660/oz through the Asian session as that region’s stocks tumbled. While the WHO is not yet ready to declare the health crisis a pandemic, Europe’s Monday morning news flow confirmed the most concerning spike in cases in Italy. Equity markets on the continent have plummeted on the news, along with most industrial commodities, while gold is the clear “winner,” having traded high enough in the early morning hours to challenge $1690. The sell-off in industrial commodities has created some drag for silver, keeping it from trading to $19/oz so far.

With the opening of American markets, gold’s rush has moderated slightly, as the three major US equity indices tumbled by as much as 3% at the open but appear to be making some efforts to fall no further. Nonetheless, gold is currently trading just below $1680/oz with a long day—and week—ahead. Should the WHO decide to apply the “pandemic” label, I suspect that word alone with give the yellow metal another strong push higher as investors flee from risk.

The virus outbreak will of course continue to dominate the markets’ narratives this week, but we still have to keep an eye on the key economic data in order to build an outlook for how long the global economy might take to recover post-crisis. Let’s jump in.

US Economic Data to Watch

Tuesday, February 25 at 9am ET // Case-Shiller Home Price Index (Dec)

[consensus expectation: +2.8% YoY // previous: +2.6%]

The data calendar does not start the week at an exciting pace. Case-Shiller has been pretty uneventful over the last year—and will likely remain so until we start to ask real questions about the end of the current US growth cycle. Added to that: the number is reported on an extra-month lag, and US financial markets have much more pressing concerns than the housing industry. That said, last week’s ugly Existing Home Sales data likely has some algo-traders (and maybe even some humans) giving extra weight to Case-Shiller, and if it’s an equally surprising number then we could see some knee-jerk moves on the gold chart.

Tuesday, February 25 at 10am ET // Richmond Fed Manufacturing Index (Feb)

[consensus exp.: +13 // prev.: +20]

While I don’t usually highlight Richmond’s regional manufacturing data, last week we saw the Empire State and Philly Fed numbers reach 9-month and 3-year highs, respectively. I’m interested to see if the strength continues (even if it’s less spectacular,) and try to work out how to square the February performance with the gloomy nationwide January PMI data (which we also saw last week.) The Richmond data will come early enough this week that I expect markets to be fully enthralled to the Covid-19 epidemic, so I have low expectations for a reaction in gold even if there’s a strong beat.

Thursday, February 27 at 8:30am ET // US GDP Growth (Q4 2019) (2^nd est.)

[consensus exp.: +2.1% QoQ // previous est.: +2.1%]

There’s rarely much in second or third estimates of GDP for the US economy, particularly when the experts are expecting no meaningful revisions to the first calculation. But, at the rate things are going, by Thursday, US investors may be either looking for good news or else extra sensitive to any downward revisions. If that’s the case, gold prices would likely be the strongest inverse correlation to any move from the Dollar.

Thursday, February 27 at 8:30am ET // Durable Goods Orders (Jan)

[consensus exp.: -1.5% MoM // prev.: +2.4%]

Durable Goods for January is another Thursday data set that could either shine a little bit of light for investors or push already roiling markets a little further. December’s number set was well above expectations thanks to a blistering 89.9% surge in defense spending which is unlikely to be replicated; so a month-over-month decline in the headline number should be seen as corrective and unexpected gains would put some momentum behind the Greenback.

Thursday, February 27 at 8:30am ET // Initial Jobless Claims

[consensus exp.: +210k // prev.: +210k]

Friday, February 28 at 8:30am ET // PCE Price Inflation (Jan)

[(core PCE) consensus exp.: +1.7% YoY // prev.: +1.58%]

[(headline PCE) consensus exp.: +1.8% YoY // prev.: +1.61%]

Market analysts and observers broadly expect the PCE Price Index (the Fed’s preferred metric for US inflation) to show the same small rise that CPI and PPI data have demonstrated in recent weeks. Over the same period, we’ve seen dovish signaling from the Fed which has had gold longs and US stock investors celebrating the soft promise of lower interest rates for longer. Rising PCE numbers may put a dent in that mood; although we likely wouldn’t see its effect in equities this week amid this mild coronavirus panic, it’s possible we might see gold prices soften a bit from these new highs. It’s worth remembering that those CPI and PPI numbers were also better than expected, so there may be some added upside for the Dollar here as well.

Friday, February 28 at 8:30am ET // Personal Income & Spending (Jan)

[(p. spending) consensus exp.: +0.3% MoM // prev.: +0.3%]

[(p. income) consensus exp.: +0.3% MoM // prev.: +0.2%]

The US consumer’s spending in support of the economy looks like it’s continuing on trend for now, which puts it in the same lane as inflation data: it’s solid enough to support the Fed’s view that further rate cuts are unnecessary to promote expansion, but still too muted to imply that monetary tightening is anywhere in sight. I think there’s less upside for hawks in this data than in PCE, so risk assets and gold will be more sensitive to disappointing spending numbers than to any upside surprise.

Friday, February 28 at 9:45am ET // Chicago PMI (Feb)

[consensus exp.: 46.0 // prev.: 42.9]

As with Tuesday’s Richmond Fed print, this week I’m elevating some tier-two regional economic data to my watchlist in an effort to analyze how the more heavily traded national PMI data for February will look, and whether it will remedy or just exacerbate surging global concern about the economic damage that the Covid-19 crisis is creating in the manufacturing space in particular.

FedSpeak this Week

The flow of FOMC member appearances is thinning out this week. While I don’t typically put them on the calendar at this point in the cycle, I want to keep an eye on at least a few of them in order to get first notice of any possible shift in the Federal Reserve’s stance towards the economic drag created by the Covid-19 health crisis. To that end, here’s my brief watchlist this week:

• Monday, February 24 at 3pm ET: Cleveland Fed President Loretta Mester (FOMC voter)
• Tuesday, February 25 at 3:15pm ET: Federal Reserve Vice Chair Richard Clarida (FOMC voter)
• Friday, February 28 at 9:15am ET: St. Louis Fed President James Bullard (non-voter)

Global Economic Data to Watch

Thursday, February 27 at 5am ET // Euro Area Business Confidence (Feb)

[consensus exp.: -0.3 // prev.: -0.23]

I’ve touched on it in recent weeks: gold’s sensitivity to US monetary policy also implies some level of sensitivity to the central banks of the Dollar’s biggest trade partners. For this reason, we’re monitoring developments in the EU economy where analysts and officials had been calling for a rebound in growth this year. The focus is a little different this week. Business Confidence is not a data set that I expect to pressure the ECB into (or away from) action; rather it will be useful to track this week in order to see just how rattled European firms are about the China’s economic shocks passing through the EU. Falling European stock markets kept a fertile ground for gold’s risk-averse rally last week and could do the same in the back half of this week.

And that’s how our week lays out, traders. I wish you the best of luck, as always, in your markets over the next trading days, and I’ll see you all back here on Friday for our weekly market wrap.