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.

Following the making of six-week highs amid last week’s election drama, gold prices are sharply lower this morning, with spot traders pricing the yellow metal just above $1865/oz and at a nearly $85/oz loss to last night’s market-open. Silver is proving slightly more resilient as a result of its industrial utility, but has also had a steep drop to trade well below $24.50 just after the start of US equity trading.

Although financial markets appeared ready to step into US stocks in a big way following Joe Biden’s victory in the US presidential election over the weekend has driven global risk appetite higher and seen Asian and European equities lifted, the race from safety into risk  kicked-off early amid reports that Pfizer’s current Covid-19 vaccine candidate is testing at a 90% success rate. Not only are precious metals prices under pressure through a shift in risk-appetite, they endured the sharpest fall in pre-market hours in response to rocketing yields on US Treasury debt as vaccines reports hit the wire.

Treasury yields are flying. 10y back above 90bp pic.twitter.com/qp2TiiSmIK

— Katherine Greifeld (@kgreifeld) November 9, 2020

Although the sell-off in gold, Treasuries, and other core safe havens was sharpest in the first round, as US stock markets have opened with both the Dow and S&P benchmarks surging to record highs thanks to the double shot of election results and vaccine hopes (at the time of writing, the indices are up by more than 5% and 3%, respectively) gold is softening further.

If I’m being honest: in spite of—an maybe even because of—the strong market buy-in to the vaccine story, I’m wary that there could be a sudden pullback as the story develops; the numbers might not mean what we think they do, or else the path from “proven successful” to “widely available in the US” could be more difficult that many seem to assume. I very truly hope I’m way off-target here, but I think it’s important when trading with risk-sensitive assets like gold to at least be aware of all possible turns. Either way, this sudden recalibration in the gold market immediately impacts any estimation of how prices will react to macroeconomic developments that we discuss here weekly. It will of course be on a case-by-case basis, but I do notice that amid the sharp selling in gold and other safe havens, the US Dollar is in the green for today’s session so far. This suggests to me (but never promises) that if or when the high of this morning fade and pockets of the market become more risk-averse, whether through a shift in the current narrative, or a round of disappointing economic data, gold will be a more attractive investment at cheaper prices.

Asking your forgiveness for such a long preamble, let’s take a look at this week’s light macro calendar.

US Economic Data to Watch

Thursday, November 12 at 830am EST // Consumer Price Inflation (Oct)

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

[(headline) consensus exp.: +1.3% YoY // prev.: 1.4%]

Analysts and economists are anticipating a vanilla set of data and reporting from this week’s Consumer Price Index. This makes sense, as September-October looks to have been the point where surveys and other measurement tools were recalibrated for the stimulus-driven rebound in consumer activity in the US economy, and because it wasn’t until the very end of October that any hope of additional fiscal support pre-election died out. Assuming the print matches expectations, we can set our baseline for core consumer inflation heading into the holiday season and then the start of 2021 at 1.7% annually, with any real move to 2% being dependent on a Biden administration and a “new” Congress’ ability to enact meaningful stimulus quickly. I don’t anticipate this week’s CPI report to compel many traders or managers to buy into gold as an inflation hedge for the medium- to long-term, but given this morning’s steep sell-off it’s likely that some will be more attracted to the yellow metal’s protection at “cheap” levels.

Thursday, November 12 at 830am EST // Initial Jobless Claims

[consensus exp.: +730k // prev.: +751k]

Now that we have what we can reliably call a consensus on the results of the US’ federal elections, I think there’s going to be a race between the weekly/monthly labor market data and the US government’s efforts to enact much-needed meaningful stimulus for American businesses as soon as possible. We touched on it briefly at the end of last week: October’s jobs-added looks “decent” as the number of new unemployment claims has (mostly) continued dropping, but the pace of improvement has slowed noticeably and we know that last month saw the very last pulses of the only round of support that medium and small businesses have received from the government so far. At this point, it’s nearly impossible to expect that a new stimulus bill could be passed before more businesses start going under and more jobs are lost in November and December, but the legislative and executive branches’ ability to do their jobs for the American people will be key in determining if it ultimately is just a pothole on the road to recovery, or if the US economy will start 2021 heading towards a much more damaging recession than we saw in the spring. As this month goes on, I would expect the markets risk-appetite to weaken as the improvement in weekly labor market data slows; As it looks like gold prices will be starting the month at relatively inexpensive levels, the yellow metal could be the first beneficiary of slower slides into risk aversion.

FedSpeak this Week

The docket for FOMC member appearances and commentary is a little light this week; Expect it to fill out a bit more in the weeks to follow. Although last Thursday’s FOMC meeting left monetary policy and “official” outlook virtually unchanged, markets will be keying in on any comments these officials in particular might have on the federal elections’ impact on the economic outlook as well as what a legitimate and widely available Covid-19 vaccine could mean for the US recovery.

Tuesday: Dallas Fed President Robert Kaplan (FOMC voter) (730am & 12pm EST); Federal Reserve Vice Chair Randal Quarles (FOMC voter) (2pm EST)

Thursday: Federal Reserve Chairman Jerome Powell (FOMC voter) (1145am EST)

Friday: New York Fed President John Williams (FOMC voter) (7am EST); St. Louis Fed President James Bullard (non-voter) (830am EST)

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.