GoldPrice.

Good morning, traders. Welcome back to our preview of the macroeconomic calendar, relevant to the precious metals and currency markets, for the week ahead.

The price of gold is considerably lower this morning, having broken back below the $1500/oz level while silver spot prices have also retreated from last week’s mark of $18/oz.

The weakness in metals to begin this week was initially driven by a rebound in risk appetite in foreign markets as we’re seeing some trade optimism in China, and in Europe we now have the EU agreement to a Brexit “flextension” through January 31. US traders have been primarily responsible for the selling in gold markets however, as we have the S&P reaching new intraday highs alongside a strong start for US stocks as a whole; the yield on the US 10 year has also risen above 1.8%.

The week’s meaningful flow of data doesn’t really get started until Wednesday—Tuesday morning’s docket does have the Case-Shiller home price update for August, but frankly it’s a number that’s only brought low-energy feedback to the metals and Dollar markets lately, and with more pertinent data sets ahead this week I would expect it to be muted out. Once things get going on Wednesday though, it’s a pretty packed backend to the week. There are multiple opportunities here for this morning’s risk-on sentiment to turn—though as always the devil will be in the details of the FOMC statement—and that’s without accounting for the tense narratives we continue to track in regards to US-China trade negotiations, and the increasing odds of formal impeachment proceedings against the US President.           

US Economic Data to Watch

Wednesday, October 30 at 8:15am EDT // ADP Employment Report (Oct)

[consensus expectation: +105k // previous: +135k]

Weekly initial jobless claims numbers have seen a mild uptick in October. While it hasn’t been to a degree that would prompt real questions about the US labor market, it may have been enough that we see a minor amount of downward pressure on the monthly jobs data.

Wednesday, October 30 at 8:30am EDT // GDP Growth Rate (Q3) (adv.)

[consensus exp.: +1.7% // prev.: +2.0%]

It’s hard not to imagine at least some negative pass-through from the US’ trade war with China hitting Q3 growth stateside; the typical American consumer has remained active and strong (to the tune of somewhere above +2.5% quarterly growth, according to analysts,) but pullback in big-ticket corporate expenditures and inventories is expected to weigh down the overall growth rate. With that said, this all falls within the “general consensus,” so a slightly sub-2% growth rate for the third quarter is probably priced-in to US Dollar and gold markets already.

Wednesday, October 30 at 2pm EDT // FOMC Interest Rate Decision

[The Federal Reserve is expected to cut short-term int. rates by 0.25% for the third time in a row]

We’ll have a more in-depth FOMC preview up later this week, but the headline is that the committee is broadly expected to announce one more “mid-cycle adjustment” on Wednesday, and then to make changes to the statement that clarify the committee is moving into a “pause.” Like we talked about last week: while lower interest rates correlate to higher prices for gold, the bid into the yellow metal could be more muted this time around as the market digests the high likelihood that this is the final increase in monetary accommodation for the foreseeable future.

Thursday, October 31 at 8:30am EDT // Personal Income & Spending (Sep)

[(income) consensus exp.: +0.3% MoM // prev.: +0.4%]

[(spending) consensus exp.: +0.3% MoM // prev.: +0.1%]

We’ve touched multiple times on how important the role of the spending consumer is to these later stages of the US economic cycle, so most of the attention here will be on whether Personal Spending can pull up from a really mild print last month. This will be a crowded timeslot for data, however, so be prepared for a lot of noise that could mute the Dollar’s (and gold’s) reaction to any individual beat or miss.

Thursday, October 31 at 8:30am EDT // PCE Price Index (Sep)

[(core PCE) consensus exp.: +1.7% // prev.: +1.77%]

[(headline PCE) consensus exp.: +1.4% YoY // prev.: +1.44%]

Not for the first time, because September’s PCE inflation read comes out after an FOMC meeting that we expect one way or another to re-frame our perception of the policy path into 2020 it’s hard to be sure that anything we say about it today will still be relevant on Thursday. The biggest thing to keep in mind is that the PCE is still considered the preferred inflation gauge of the Fed. So, assuming the Fed acts as expected on Wednesday the importance of Thursday’s PCE data (and indeed Friday’s jobs report) will depend on how convinced the FOMC seems to be about the decision to pause after another rate cut—if there seems to be a lot of division or uncertainty, these assessments of inflation and the labor market will be highly sensitive to for the Dollar and for gold prices over the next two months.

Thursday, October 31 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +215k // prev.: +212k]

Friday, November 1 at 8:30am EDT // October Jobs Report

[nonfarm payrolls consensus exp.: +90k // prev.: +136k]

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

As I mentioned near the top, weekly jobless claims, while slightly elevated from September, are still firmly in the “very low” category overall. Combined with an increased tightness all over the labor market, this will lift the NFP number a little higher to the point that triple digits is not totally out of the question. Still, the factors weighing down hiring seem to be the stronger side this month: there is of course the dampening effect that the US-China trade war has on retail and manufacturing jobs, and this time around we can also expect some major weakness accounting for the GM Auto Workers strike which some analysts are suggesting could take nearly 50k out of the overall number. If the Fed suggests on Wednesday that a pause into 2020 is less set in stone and more data-dependent, it’s possible that a low NFP print on Friday could end up being more of a boost for gold prices than Wednesday’s (presumed) rate cut.

Friday, November 1 at 10am EDT // ISM Manufacturing Index (Oct)

[consensus exp.: 49.0 // prev.: 47.8]

Despite continued pressure from the US-China trade war, many of the regional surveys of manufacturing have returned to strength this month. As a result, analysts are optimistic and calling for the first increase to manufacturing PMI in seven tries—although it’s still expected to remain in contractionary (sub-50) territory. The market response to this number will probably be muted, coming at the end of a busy week. I do think that a big dislocation (up or down) against expectations would probably cut through the noise and motivate some Friday trading in gold, but that seems unlikely to happen.

Friday FedSpeak

[On the heels of Wednesday’s FOMC decision, there will be two public appearances by Fed officials on Friday afternoon that are worth your attention.]

• Federal Reserve Vice Chair Richard Clarida (FOMC voter) at 1pm EDT
• New York Fed President John Williams (FOMC voter) at 2:30pm EDT

Global Economic Data to Watch

Monday, October 28 at 10am EDT // Outgoing ECB President Mario Draghi’s Farewell Speech

This is likely to be low impact beyond, maybe, the Euro market. But, given how Draghi’s final post-meeting presser seemed to jolt the market into refocusing on the forward path for global monetary policy last week, I can’t totally rule out that the outgoing ECB chief could get markets wound up again.

Wednesday, October 30 at 11pm EDT // Bank of Japan Interest Rate Decision

[no major change short term rates, but dovish adjustment is expected.]

Taking information from last week week’s quarterly assessment into account, it seems doubtful that this is to be the month that the BoJ pushes already ultra-low short-term interest rates into negative territory, but there is an expectation for the central bank to formally extend the planned timeframe for the current accommodation through (at least) spring of next year.

Thursday, October 31 at 6am EDT // Euro Area GDP Growth Rate (Q3)

[consensus exp.: +1.1% // prev.: +1.2%]

Thursday, October 31 at 6am EDT // Euro Area Inflation (Oct)

[consensus exp.: +0.7% YoY // prev.: +0.9% YoY]

Thursday will give us this snapshot of how the common currency area is digesting the ECB’s reactivation of QE as leadership at the central bank is changing. Not a lot of fireworks expected here, but any big surprises would have the impact to swing the Euro hard enough to influence the Dollar and possibly gold in turn—but only briefly.

And that’s our (very crowded) week ahead on the macroeconomic calendar, traders. I wish you the best of luck in the precious metals and Dollar markets this week; and I’ll see you all back here on Friday for a recap of it all.