GoldPrice.

Happy Monday traders, welcome to another week.

The overnight European markets and early New York trading sessions continued to pile the pressure onto gold spot, driving yellow metal toward the $1285/oz level where it currently looks to consolidate. As we discussed in last week’s wrap up, US Dollar strength is the current king of the ring when it comes to trading gold prices. This week’s macroeconomic calendar is on the lighter side and doesn’t offer many obvious opportunities to slow the Greenback which the exception of a strong downside surprise on Friday’s jobs report. That said, we’ll also be following word of a US-China trade deal possibly being just over the horizon as well as the President’s recent comments that the US Dollar is “too strong.”  

With that in mind, let’s have a look at your macroeconomic calendar for the week.

US Economic Data to Watch

Tuesday, March 5 at 10am EST // ISM Non-Manufacturing PMI (Feb)

[consensus expectation: 57.3 // previous: 56.7]

Expect a little extra attention on this month’s “services” PMI after the variant focused on the US manufacturing sector was once again a disappointing print on Friday morning. Like the manufacturing number, services industry PMI has been dropping since last fall, and persistently lower reads of business confidence over the last 30 days suggest the headline number will remain suppressed around the 57.0-level. While broadly negative for US Dollar prospects, this wouldn’t be a great surprise (barring a print closer to the 50.0-breakeven) to analysts so it’s difficult to argue to that slowing service sector activity is not already being priced in to a still-roaring USD.

Tuesday, March 5 at 10am EST // New Home Sales (Dec)

[consensus exp.: -8.7% MoM // prev.: +16.9%]

Obviously, we’re looking at a massively negative delta between New Home Sales for November vs. December; another leading indicator of US economic health showing signs of slowing. But as we’re still catching up on data reports from the government shutdown, expect this report to be more of an echo than an impact: there could be some immediate reactions in US Dollar and gold pricing that create an arb. opportunity but I would expect levels to ultimately return to the mean.

Wednesday, March 6 at 8:15am EST // ADP Employment Report (Feb)

[consensus exp.: +185k // prev.: +213k]

As always, the main purpose of tracking ADP here is to mark the correlation between ADP-actual vs. expected, and NFP-actual vs. expected. Both December and January’s outsized NFP surprises were preceded by strong beats on the ADP employment report, though it’s important to remember that, historically, the degree of the surprise correlates well but not the direction.

Thursday, March 7 at 8:30am EST // Initial Jobless Claims

[consensus exp.: 225k // prev.: 225k]

Weekly layoffs seem to be settling around 225k for the time being, elevated from fall of last year.

Friday, March 8 at 8:30am EST // Non-Farm Payrolls + Unemployment (Feb)

[NFP consensus exp.: +185k // prev.: +304k]

[Unemployment consensus exp: 3.9% // prev.: 4.0%]

December and January’s (for lack of a better word) outrageous NFP numbers, exclusive of tampering, have to come back down at some point. Based on just how surprisingly strong those +300k prints were, the hints of slowing from other measurements of the American economy, and some brutal winter weather this month, I suspect the inevitable catch-down could be even more severe than expected. Better said by the US economic team at Goldman Sachs:

Weather-sensitive payroll categories rose at a five-year-high pace in January: +147k, mom sa, and we note the possibility that the February payback is even larger than our baseline. Given tighter financial conditions, moderation in business surveys, and the rebound in initial jobless claims, we also believe the underlying payroll trend is slowing (from its 6-month average pace of +232k per month).

That kind of negative surprise might have enough of an impact to apply noticeable drag on the US Dollar and lift gold prices heading into the weekend.

Friday, March 8 at 8:30am EST // Housing Starts (Jan)

[consensus exp.: +9.9% MoM // prev.: -11.2%]

January Housing Starts should show an uptick from December’s number, and demonstrate that the sharp drop at the end of 2018 was just a holiday blip. Either way, it’s safe to assume any market impact that this catch-up data might have will be dwarfed by the coinciding NFP report.

Global Economic Data to Watch

Thursday, March 7 at 7:45am EST // ECB Monetary Policy Meeting

[No changes to monetary policy expected]

Both in the statement from the Council and, presumably, in ECB President Mario Draghi’s press conference after (scheduled for 8:30am EST,) analysts expect an acknowledgement of the current headwinds to economic growth in the Euro Area, but that the Council will remain constructive on their outlook for 2019 as a whole, anticipating a positive correction in the second half of the year. There is some discussion expected of slight changes to overall monetary policy, but no specifics announced this month. Overall, should the meeting deliver as expected it shouldn’t be much of a driver in currency or gold markets at this time.

As I mentioned at the outset, the developing stories around US-China trade talks and in particular the administration’s views on recent US Dollar out-performance will be worth tracking over the course of this week as well; they have the biggest potential, outside of Friday’s NFP, to impact gold prices through the Dollar input. Should anything material come to pass this week, we’ll be sure to cover it in Friday’s wrap up.

Best of luck out there, traders. I’ll see you on Friday.