GoldPrice.

Good morning, traders. Welcome back to Monday, and welcome back to our preview of the trading week ahead, focusing on the economic data, news flow, and market narratives that look likely to have to biggest impact on gold prices, as well as the US Dollar and other key correlated assets.

Gold prices are considerably lower than their Sunday start, this morning. As global stock markets have sold off to begin the week due to rebounding coronavirus infection rates all over the globe and a new preventative lockdown in China, the key dynamic that supported gold’s rise last week seems to have reversed course. As investors see risk to the outlook growing, risk aversion is once again pushing a move to hard cash over all else and the US Dollar once again looks like the dominant safe haven play. On Monday morning that looks like a rising Dollar Index, US 10-year yields pushed back below 0.7% as investors pile into Treasuries, and gold spot prices far off the pace at $1710/oz and lower.

It looks as if the global fight to (re)contain the Coronavirus pandemic will be the dominant market narrative once again after investors for weeks assumed the battle was won; we’ll also be looking out for any further developments around US-China trade tensions which have taken a back seat since May but still have the potential to rock the global economic outlook.

US Economic Data to Watch

Tuesday, June 16 at 8:30am EDT // Retail Sales (May)

[consensus exp.: +8.0% MoM // prev.: -16.4%]

As some US state began the phased process of reopening in May, economists expect a moderate uptick in retail data for the month although not a full recovery from April’s contraction. The high-frequency data that comes from credit card reporting and other sources has so far confirmed that outlook. This one feels like enough of a no-brainer that it’s likely well priced into markets this week, and an as-expected report probably doesn’t move gold or Dollar prices much beyond the initial release. Still, Goldman Sachs and other analyst teams are issuing the caveat that April and May’s numbers could still be missing numbers from the retail business most harmed by the shutdown (through non-reporting), so there’s a risk of considerable downside revision to April’s data which would send investors into risk-off positions.

Tuesday, June 16 at 9:15am EDT // Industrial Production (May)

[consensus exp.: +3.0% MoM // prev.: -11.2%]

Two things that this morning’s Empire State Manufacturing numbers re-confirmed: the continued signs of a rebound in the US industrial sector that is outperforming expectations, and a degree of sensitivity in risk appetite to the improved data. With that in mind, it’s reasonable to assume some upside risk to the +3% expected which could put some downward pressure on safe havens like gold.

Wednesday, June 17 at 8:30am EDT // Housing Starts (May)

[consensus exp.: +23.5% MoM // prev.: -30.2%]

With manufacturing sector and labor market data making a recovery (so far) in the month of May, economists and investors will be looking to see similar movement in the housing market. It looks like they’ll get it. Not expecting much movement in asset prices, including gold, around this number this month.

Thursday, June 18 at 8:30 am EDT // Philadelphia Fed Manufacturing Index (June)

[consensus exp.: -25.0 // prev.: -43.1]

Don’t be surprised in economists adjust their expectation for the Philly Fed number slightly higher on the back of this morning’s regional data from New York. Either way, I see more risks to the upside than down, and if gold prices remain near support levels we could see enough risk-on trading to send the chart to lower levels.

Thursday, June 18 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +1,290k // prev.: +1,542k]

As the crushing rate of job losses has continued decreasing week-to-week, the rate of decline has slowed considerably as we approach the 1 million mark. This could become a concern for the medium-term outlook (it would take some time for markets to accept with any stability that “normal” includes millions of jobs lost forever,) especially if the number of continuing jobless claims doesn’t start dropping faster. In a week of potential headwinds for gold (and other non-Dollar safe havens,) this is the one point that I could see going the other way.

FedSpeak this Week

As is the custom in these parts just following an FOMC meeting, we’ve got a lot of public appearance by Federal Reserve officials this week, highlighted by Chairman Jerome Powell’s semi-annual testimony to Congress. There’s little question about either ultra-low interest rates or wide-open asset purchase policies coming to an end any time soon, but there are still a few topics we’d be interested to get some more specific input on. Namely: the likelihood (and potential timing) of the central bank enacting yield-curve control as a defensive policy measure; and when we can expect the FOMC to start issuing clear forward guidance following policy meetings (as in, “the Fed will evaluate raising rates only when inflation/unemployment reaches X.”) I don’t expect Powell to speak on anything that substantive in front of the Congressional committees, but we’ll keep an eye on his colleagues’ commentary

Monday: June 15: Dallas Fed President Robert Kaplan (FOMC voter) (10am EDT); San Francisco Fed President Mary Daly (non-voter) (12:30pm)

Tuesday, June 16: Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee (10am); Federal Reserve Vice Chair Richard Clarida (FOMC voter) (4pm)

Wednesday, June 17: Fed Chairman Powell testifies before the House Financial Services Committee (12pm); Cleveland Fed President Loretta Mester (FOMC voter) (4pm)

Friday, June 19: Boston Fed President Eric Rosengren (non-voter) (10:15am); Federal Reserve Vice Chair Randal Quarles (FOMC voter) (12pm); Fed Chairman Powell & Cleveland Fed President Mester (FOMC voters) (1pm)

And that’s how the next five trading days lay out in front of us, traders. As always, I wish you the best of luck in your markets this week. I’ll see you back here on Friday for our weekly market wrap.