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 slightly weaker to begin Monday’s US session but showing some momentum to rally back to $1835/oz, as the global market seems to be choosing optimism to start the week and risk-appetite is up; Silver has had a better start, looking to retake a hold above $24/oz. Traders and analysts seem to be focusing on the first stages of distribution of one Covid-19 vaccine in the US and the eventual emergency-use approval of aa second, while clinging to hope that the US government will pass an omnibus funding bill that includes some degree of fiscal stimulus to the American economy before Friday’s extension deadline. Global equity markets are generally in the green on Monday, with US futures pointed the same way.

The market week looks likely to be dominated again by the two market narratives that we’ve been discussing for more than a month now: the simultaneous races to contain the resurgent coronavirus while rolling out a vaccination plan, and to pass a meaningful rescue package to keep the US consumer and small businesses afloat before the next wave comes in. We can expect the headlines and reports—confirmed or otherwise—around these stories to sway risk-appetite and market sentiment, and through them gold and silver prices, above all else for the next five sessions.

With that in mind, let’s take a look at the economic calendar for this week.

US Economic Data to Watch

Wednesday, December 16 at 830am EST // Retail Sales (Nov)

[consensus exp.: -0.3% MoM // prev.: +0.3%]

When we get retail data this week, what will be interesting to look for is if the market has a logical reaction to the (expected) numbers or a more emotional one. From a logical view, a mild pullback—although some analysts are worried the actual slowdown will be closer to 1%-- is to be broadly expected and should be priced-in to market models. Afterall, we know that the last dregs of government stimulus for workers and consumers expired in November, slowing general consumption at the same time as fears about the “third surge’ of Covid were rising and further denting retail inputs like mall traffic. And comparatively speaking, it’s tough to expect a month-over-month gain when Amazon Prime Day took place in the month prior. With all that in mind, despite the general air of concern that grows exponentially with each week that comes and goes without a new, meaningful fiscal rescue package, an as-expected drop in November retail sales shouldn’t catch the market or its money off guard. Of course, we know that emotion is a relevant factor in markets—in trading especially—and it can overwhelm the more reasonable thinking. While the expected drop in retail activity shouldn’t rock markets, depending on the perceived status of stimulus talks on Wednesday, just the sight of a negative November number might push investors, reacting emotionally, deeper in to a risk-off mood. Based on recent trends, I’d expect that kind of knee-jerk to benefit gold prices in the immediate term.

Wednesday, December 16 at 945am EST // Markit US PMI (Dec)

[(mfg.) consensus exp.: 56.0 // prev.: 56.7]

[(services) consensus exp.: 55.8 // prev.: 58.4]

IHS’ Markit PMI activity indicators are not ones that I usually track closely week to week; While Markit’s surveys are the preferred metric for activity growth in European economies they take a backseat to the ISM’s data sets when modeling the US. Still, last month’s report, which included one of the strongest reads on US manufacturing in years, certainly had an impact on the market as it opened up investors’ risk-appetite. With that in mind, it’s worth watching to see how the next data set presents itself to determine if November will be key to a trend, or just an aberration. We’re expecting some moderate correction this month from November’s surprise jumps, which should make for a much calmer market reaction.

Wednesday, December 16 at 2pm EST // FOMC Interest Rate Decision

[no meaningful changes to monetary policy are expected.]

Especially with the Fed’s framework shift this year with regards to targeting inflation in the US economy, odds of an adjustment to current monetary policy this month are effectively zero. What most analysts and observers will be looking for is an update to the FOMC’s statement which should include “qualitative outcome-based forward guidance” around the Fed’s rate of asset purchases (used to promote and support the economy in the current downturn); That is to say: The Fed is expected to more explicitly state that the massive asset purchasing program will continue until the labor market and inflation targets are met. This is all broadly supportive of gold prices in the long term as it implies that yields will remain historically low for considerably longer (improving gold’s value proposition,) and also that there will be a need for investors to hedge against inflation at some point as the Fed will allow it to run “hotter” in an effort to reach the 2% target. What I don’t anticipate this week is a meaningful move in gold in the near-term, as this as all been telegraphed for several months. Of course, there will always be some jerky chart-trading in gold, the Dollar, and Treasuries just before and after the FOMC statement—but there’s little reason to expect it to last.

This month will also include updated economic projections from the Fed. The committee will mostly be reacting to two opposing inputs: exponentially worsening health conditions as the coronavirus’ winter surge continues, and more concrete grounds for an economic recovery in 2021/22 as vaccination has become a more immediately probably reality. Analysts expect this push-pull to be reflected in the FOMC staff projections perhaps getting more negative in the near-term but also brightening considerably for the medium-term outlook and beyond.

Thursday, December 17 at 830am EST // Initial Jobless Claims

[consensus exp.: +800k // prev.: +853k]

Last week’s unexpected surge in new unemployment claims was a serious blow to investors betting on near-term improvement in the US economy, particularly as it seriously suggests that the prior week’s drop was a false-dawn amid a worsening US labor market. I think the biggest focus this week will be on whether the claims number does in fact remain above 800,000 for a second consecutive week. If it does, assuming there’s no meaningful news around a stimulus bill that would change the market’s mood, I would expect to see investors pulling money off the table out of caution, boosting safe-havens in the immediate response; through primarily I’d expect positions to be built in US Dollar before gold.

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.