GoldPrice.

Good morning traders, welcome back to our weekly preview of the market week ahead with a focus on the macroeconomic data and narratives that could have the biggest impact on gold, the Dollar, and other related assets.

Gold prices are higher this morning and trading near to $1600/oz in the spot markets following a brief early morning dip beneath that major psychological level, and a rush of volatility as US markets have opened for the week. Gold’s chart spent much of the overnight Asian and European sessions trading over $1600 while yields on the benchmark US 10-year notes sunk below 1.1%; as US equities have taken a tentative step forward this morning, traders appear to be trying to solve for how rebounding American markets might affect the yellow metal.

The number of global deaths attributed to the Covid-19 coronavirus now at 3,000 and over the weekend came reported cases in several new major metro areas, including in the US. When looking at the gold markets’ reaction, we see a continuing push-pull battle between the traditional strength of gold as a safe haven investment and the trio of market forces that are currently creating strong headwinds for the yellow metal as we discussed on Friday: major demand concerns in the commodity space (which Goldman Sachs today says may be the biggest demand shock since 2008,) stronger attraction to US debt, and firms and investors worldwide in increasing and immediate need of cash. Even the top-tier economic data has taken a back seat to the health crisis when it comes to gold (and the broader financial markets) over the last few weeks. There suggestion of emergency action from the Fed is still on the table, but if this tug of war in gold prices remains a stalemate I suspect a positive or negative surprise in some of this week’s big numbers—likely the Jobs Report on Friday, but possibly some headline ISM data as well—could help the charts pick a direction.

With that in mind, let’s take a look at the calendar.

US Economic Data to Watch

Monday, March 2 at 10am ET // ISM Manufacturing PMI (Feb)

[consensus expectation: 50.1 // previous: 50.9]

Regional manufacturing surveys generally have performed well over the last month, but there have been some soft spots, including Markit’s nationwide manufacturing PMI. With that in mind and given that it took a major improvement to push the ISM’s headline number over 50.0 last month, it seems appropriate to expect the metric to keep in the expansionary range above 50 but only just. I’m not sure there’s a lot of upside for the Dollar here (unless we see something closer to 60,) but USD weakness could turn to gold strength if the gauge dips back into its 2019 levels in the 40s.

Wednesday, March 4 at 8:15am ET // ADP Employment Report (Feb)

[consensus exp.: +170k // prev.: +291k]

We’ve seen massive outperformance from the ADP number over the last two months when analysts were calling for something in the mid-100s as they are this month, and the number of jobless claims has remained similarly subdued through February, so the consensus expectation this month could again be a little low. Of course, as tends to be the case when it comes to forecasting financial markets, you could list all of those same facts and argue that the ADP number is due for a big downside correction like we saw in November. Either way, while ADP can be a predictor of how the more meaningful nonfarm payrolls number will look, it’s never been a reliable enough directional correlation to build a (smart) trading plan on, so I’m not looking for a lot of gold volatility around ADP this month amid Covid-19’s market turmoil.

Wednesday, March 4 at 10am ET // ISM Non-Manufacturing PMI (Feb)

[consensus exp.: 55.0 // prev.: 55.5]

As with Monday’s manufacturing-focused variant, there have been some signs of improvement but Markit’s service sector PMI coming in below 50.0 is a big concern as well so I agree with the general consensus that February’s ISM headline number will stay mostly unchanged month-to-month. There are also the same downside sensitivities for gold price action here, I think.

Thursday, March 5 at 8:30am ET // Initial Jobless Claims

[consensus exp.: +216k // prev.: +219k]

Friday, March 6 at 8:30am ET // February Jobs Report

[(NFP) consensus exp.: +175k // prev.: +225k]

[(unemployment) consensus exp.: 3.5% // prev.: 3.6%]

There are a lot of positive inputs that could boost the Non-Farm Payroll number for February: the US labor market remains pretty tight, and the most negative effects of the US’s trade war with China (pre “phase one”) continue to phase out. At the same time, this data set was likely collected too early to see the coronavirus leave a major impression—but expect that next month. All told, there looks to be more upside again for the NFP above expectations. Typically, we would expect that to lift the Dollar higher and put some pressure on gold prices but, given the accelerated moves into USD (particularly as cash) that we’ve discussed, traders should be on their toes for a more unconventional trading pattern.

The headline unemployment number should remain pegged to the bargain basement of 3.5%, but I will point out that last month’s slight creep to 3.6% saw a wholly disproportionate (if short-lived) reaction in gold prices, which traded nearly $10 higher following the release.

FedSpeak this Week

It’s pretty easy to tell what to watch for in commentary from Fed officials this week: How close could we be to triggering the emergency actions from the FOMC that Chairman Powell promised would come if needed? Keeping that in mind, here are the tier-one appearances from Fed officials on this week’s docket:

Tuesday, March 3: Cleveland Fed President Loretta Mester (FOMC voter) (2:50pm ET); Chicago Fed President Charles Evans (non-voter) (6:30pm)

Thursday, March 5: Minneapolis Fed President Neel Kashkari (FOMC voter) (8pm ET); New York Fed President John Williams (FOMC voter) (8:35pm)

Global Economic Data to Watch

Tuesday, March 3 at 5am ET // Euro Area Inflation (Feb)

[consensus exp.: +1.2% YoY // prev.: +1.4%]

We keep our watch on the top tier European economic data in an effort to predict any differential in monetary policy between the US and the Dollar’s major trading partners in the event that the Fed remains on hold and its counterparts ease further. The acute possibility of emergency action from the FOMC as well as other major central banks certainly changes the calculus of all this, but it will remain a relevant factor in the financial markets post-crisis.

And that’s how your week ahead looks, traders. I wish you all the very best of luck in your markets this week, and I’ll see everybody back here on Friday for our regular market wrap.