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 this morning are nearly flat to where they opened last night’s trading, following a tumultuous overnight session in which a great deal of pressure was applied to the yellow metal’s spot chart by a rallying US Dollar. As we moved towards the US session and it became clear that equities would be getting off to a rocky start this week (as investors re-adjust their expectations for the next round of fiscal stimulus from the next US Congress,) traders have been happy to take advantage of “cheaper” gold as a safe-haven, bidding prices back near the $1850/oz level. Silver prices have traded a similar pattern, and sit just above $25/oz an hour after stock markets opened in New York.

That rebound in the Dollar looks like it will be a key factor in our most closely watched markets this week, as investor sentiment and the mixing of economic and geopolitical narratives will remain in the driver’s seat instead of data points. Given the events of the last few weeks, it seems wise to brace for the possibility of the outgoing US administration putting together a chaotic final week which might rattle markets’ risk appetite or skew expectations for the first quarter of 2021. And, still, the ongoing efforts to contain the rampaging COVID-19 pandemic will continue to shade the market reaction to any data or headlines.

For now, let’s look at the week ahead.

US Economic Data to Watch

Wednesday, January 13 at 830am EST // Consumer Price Index (Dec)

[(core CPI) consensus exp.: +1.6% YoY // prev.: +1.6%]

[(headline CPI) consensus exp.: +1.3% YoY // prev.: +1.2%]

The rough shape of how December’s consumer price inflation numbers will look this week is pretty easily inferred from the other macroeconomic data we’ve seen from the last month of 2020: the winter surge in coronavirus cases around the world and across the US, and the reintroduction of harsher restrictions in an effort to counter it stalled the US economy’s already faltering summer/fall recovery; As a result, American spending and activity in December was relatively dreadful. Taken from an annualized view, as we always do with CPI, that looks like consumer prices remaining below the ideal 2%.

The projected rates for both “core” and headline inflation feel pretty well priced-in to January markets, so I don’t expect a great deal of market reaction (aside from some initial knee-jerks in the Dollar, maybe) on their release. But I will point out that a few analysts and commentators have ascribed the New Year’s rally in Treasury yields—which has been a difficult headwind for gold prices to overcome-- to investors’ inflation expectations moving considerably higher. Whether or not those expectations are likely to be valid over even the next 12-18 months is a topic for another post (hint: I don’t think so,) but I’ll be watching this month and next to see if there are any corrections in that imprecise sentiment when CPI reports inflation closer to 1% than to 2%.

Thursday, January 14 at 830am EST // Initial Jobless Claims

[consensus exp.: +785K // prev.: +787K]

Analysts are calling for weekly unemployment claims to hold the recent line just below 800,000. While it would likely help pull the running four-week average back below 800K as well—a hoped-for improvement—without any acceleration lower week to week I think economists will become concerned again about a lack of improvement as we move into February. As it stands, a lot of eyes will be on whether or not these high-frequency data points on the US labor market show the hoped-for reaction to the most recent round of fiscal stimulus passed in December. Even with the Greenback’s strength to start this week, I think seeing the four-week average for jobless claims dip back below 800,000 will give the Dollar a bit of a boost at the end of the week; Even more so if the weekly number prints closer to 750K.

Friday, January 15 at 830am EST // Retail Sales (Dec)

[consensus exp.: 0.0% MoM // prev. -1.1%]

There’s not really an effective way to spin a lack of growth in retail spending in the Holiday season. With that said, for the same reasons touched on in discussing Wednesday’s inflation data, December’s dour Retail Sales number is probably fairly priced into markets from a technical standpoint. Still, “flat” retail activity in December will always drive some headlines, so, depending on where the market’s risk appetite sits at the end of the week, we could see a brief spike in risk aversion when this data hits the wire.

FedSpeak this Week

Our FOMC-focused docket is a little busier this week, with several influential and/or voting members scheduled to deliver their individual economic outlooks for 2021 (as they stand.) I don’t think we’ll hear anything surprising this week; The party line— that monetary policy will remain ultra-accommodative for the foreseeable future and that expansive fiscal policy will be necessary to ensure a lasting economy recovery—remains in place. In our section above discussing this week’s inflation data, I touched on the speculation that expectation for rising inflation (and the trades to hedge against it) is driving some moves in the debt markets; I’ll be interested to see if any of this week’s Fed officials address those expectations and what the market effect will be.

Monday: Atlanta Fed President R. Bostic (FOMC voter) (12pm EST)

Tuesday: Kansas City Fed President E. George (non-voter) (1pm); Boston Fed President E. Rosengren (non-voter) (2pm)

Wednesday: Fed Governor L. Brainard (FOMC voter) (1pm); Fed Vice Chair R. Clarida (FOMC voter) (3pm)

Thursday: Fed Chairman J. Powell (FOMC voter) (1230pm)

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.