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.

Gold prices are trading roughly flat to Friday afternoon’s session close, an hour after the start of cash trading in US markets. While both gold and silver saw a boost from some European traders rotating away from equity risk in the early hours of this morning, both have corrected a bit lower to begin the week.

Pretty much every market commentary column or blog is getting tired of saying week-in and week-out that the dominant factor in financial markets is the tension between optimistic expectations of new fiscal stimulus in the US and pessimistic worries about the constantly climbing number of infected and dead due to the COVID-19 pandemic. Including this one. And yet, say it with me: the dominant factor in financial markets this week is the tension between optimistic expectations of new fiscal stimulus in the US and pessimistic worries about the constantly climbing number of infected and dead due to the COVID-19 pandemic. Today, that tension is resulting in a truly mixed back for markets, with the major US indices moving in different directions while the Dollar rises but gold also enjoys reliable support (for now.)

As we watch some higher-tier economic data come in this week and a get a direct update to the Federal Reserve’s read of the situation, we’ll be keeping an eye on headlines around the success (or lack of) in distributing COVID-19 vaccines throughout the globe while keeping harsh economic restrictions in place, and reporting on the nascent Biden Administration’s efforts to get a massive fiscal relief package through congress.

With that in mind, let’s look at this week’s calendar.

US Economic Data to Watch

Wednesday, January 27 at 830am EST // Durable Goods Orders (Dec)

[consensus exp.: +0.9% MoM // prev.: +0.9%]

Seeing the rate of Durable Goods ordering, a prime driver of manufacturing in the US economy, rising just barely 1% from month to month is a somewhat worrying data point in isolation; But we did see at the end of last week that at least one measurement of overall domestic manufacturing activity is reporting greater expansion than expected, so I think any concern about Durable Goods Orders in isolation (as long as the number holds above, say, 0.5%) will be muted when looked at alongside other indicators.

Wednesday, January 27 at 2pm EST // FOMC Interest Rate Decision

[no meaningful changes to monetary policy are expected.]

With virtually zero expectations for action from the FOMC this month, attention will be on the messaging in the Fed’s post-meeting statement and Chairman Powell’s press conference; Even those signals are expected to be little changed from the end of 2020. Analysts are looking for the committee to acknowledge the deterioration in economic conditions in the US abroad—rising health risks and falling consumer activity—but not to go as far as to actually downgrade the medium-term outlook. I think this messaging could provide a boost for US stocks (because the Fed still sees strong recovery in 2021,) but also for gold (because the Fed still sees rate hikes as very far away.)

Thursday, January 28 at 830am EST // US GDP Growth (Q4) (adv.)

[consensus exp.: +4.2% QoQ // prev.: +33.4%]

If we take a deeper dive than usual into the component projections for our first read of fourth-quarter GDP, we’ll see a decent amount of consumption growth coming from investment in durables/equipment and in the housing sector; At least enough to (apparently) offset the sluggish performance in retail sales data. 4% economic growth is a fairly strong performance relative to recent years, so we may see an extra boost in risk appetite when the GDP data is release, but I don’t expect it will sustain much past the knee-jerk reaction once investors start parsing the data.

Thursday, January 28 at 830am EST // Initial Jobless Claims

[consensus exp.: +880K // prev.: +900K]

Most analysts expect that the massive jump in jobless claims reported two weeks ago was the top of an outlying surge, but it is concerning that nobody feels confident in calling for a sharp decline from the peak. If this week’s claims number comes in roughly tuned to expectations I don’t think we’ll see much of a shudder in risk markets, but the longer that the four-week average floats above 850,000 unemployment claims per week, the more pressure that will put on investors’ and Fed officials’ economic outlook for 2021, of which a recovering labor market is a key piece.

Friday, January 29 at 830am EST // PCE Price Index (Dec)

[(core PCE) consensus exp.: +1.3% YoY // prev.: +1.38%]

[(headline PCE) consensus exp.: +1.2% YoY // prev.: +1.13%]

Under the Fed’s (relatively) new framework for meeting—and surpassing-- the mandate for 2% inflation, it’s tough to imagine the FOMC even debating lifting interest rates out of the basement until their own metric for price inflation moves above 1.75%. With that in mind, watching the monthly inflation data becomes less of an exercise in monitoring acute price risk events and more about building longer-view models of how much inflation may (or may not) be accelerating towards those targets over the near- to medium-term. Based on the other December data we’ve already seen (CPI inflation, Retail Sales, etc.,) it’s not terribly surprising to see that the PCE Index is expected to report core price inflation below 1.5% again; But as we move farther in to 2021, inflation will be a key indicator of how successful the roll out of Covid-19 vaccines and any additional fiscal stimulus (combined with the Fed’s ultra-easy monetary policy as a constant) is in terms of reviving the US economy.

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.