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 moderately higher to begin the week, as the weekend break seems to have given global investors time to shake off some of last week’s doom and gloom, reflected in a mild rebound in risk appetite since markets reopened yesterday evening. Equity markets are on the rise, with the major overseas indices in the green and US benchmarks having recently opened to gains of 1% and higher. This is alleviating a lot of last week’s pressure on the precious metals, with gold spot prices tipped back towards $1870/oz while silver’s chart is attempting to consolidate above $23.

As we can see in the first trading of the US session, this rebound in positive sentiment seems to have investors of two minds about gold to being the week. The yellow metal is certainly benefiting from slowing in last week’s rush to cash allowing prices some upside breathing room, but with stock prices rallying it’s understandable that some investors and managers will push their chips into those risk assets instead of the safer ground of gold and silver. As I’ll mention in covering the data calendar that follows, this is the variable dynamic that gold traders will need to mark this week.

The economic calendar ahead of us gets busy on the back-end of the week, with focus on the Fed’s inflation metrics and the monthly Jobs Report for September. At the same time, we’ll be paying attention to the Fed’s continued calls for (much) greater fiscal stimulus and the US Congress’ inability to provide it ahead of November elections.

US Economic Data to Watch

Wednesday, September 30 at 8:15am EDT // ADP Employment Report (Sep)

[consensus exp.: +630k // prev.: +428k]

With the general consensus among analysts looking for a solid step higher in private payroll growth in September, I don’t expect recently disappointing initial jobless claims numbers to ding a potentially positive data point just yet, but let’s keep an eye out for that kind of risk-off signal. Assuming the actual number is something close to expectation, it’s possible we’ll see a brief knee-jerk of optimism that bounces investors’ risk appetites and (if the start to the week is an indication) may give gold prices some relief to rise. Should that happen, keep in mind that there is no reliable directional correlation between a beat in ADP data and the same week’s non-farm payrolls so avoid the temptation to dramatically adjust your expectations for Friday.

Thursday, October 1 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +850k // prev.: +870k]

Speaking of initial claims: the inability of the longer-term trend (or, in fact, even the single-week data point) to drop below 825k new unemployment claims per week is becoming a point of frustration and worry for economists. This week, being sandwiched between September’s biggest labor market reads and releasing at the same time as the Fed’s inflation data means that we won’t get a clear picture of the market’s reaction to whatever initial claims number is reported; so we’ll just be observing it this week as an input for the four-week average.

Thursday, October 1 at 8:30am EDT // PCE Price Index (Aug)

[(core) consensus exp.: +1.4% YoY // prev.: +1.25%]

[(headline) consensus exp.: +1.2% YoY // prev.: +1.0%]

Thursday, October 1 at 8:30am EDT // Personal Income & Spending (Aug)

[(spending) consensus exp.: +0.8% MoM // prev.: +1.9%]

[(income) consensus exp.: -2.5% MoM // prev.: +0.4%]

Alongside the weekly jobless claims data, we’ll get a lot of noise from the Federal Reserve’s monthly report on inflation (back-dated to August.) If expectations are roughly met, we’ll see signals tipping the market’s outlook and/or risk-appetite in two different directions.

On one hand, overall price inflation is expected to pick up slightly and maintain course after managing to at least stay above 1% annually through the crunch of the spring lockdowns. While the Fed’s recently announced framework shift should dull any sense for gold markets that improving inflation is getting us pertinently closer to higher rates (which would create headwinds for gold prices,) we could see some markets move into risk-on positions on the news. Whether that would be a positive for gold—as it has been this morning—or create resistance will largely depend on the first half of this week.

On the other hand, both Person Spending and Income look likely to report some objectively ugly numbers this time around, will a sharp slowdown in household spending that had been rallying from the spring, and a multi-point contraction in average income. Neither one paints any kind of optimistic picture for the US economic outlook.

Thursday, October 1 at 10am EDT // ISM Manufacturing Index (Sep)

[consensus exp.: 56.3 // prev.: 56.0]

Based on regional inputs, as well as last week’s Markit-build variant of manufacturing PMI, it looks like we can expect the broad measure of US manufacturing activity to continue grinding higher this month. With everything else going on this week both on the data calendar and in headlines, I expect that this kind of “good but not great” news will have little impact outside of industry-focused assets.

Friday, October 2 at 8:30am EDT // September Jobs Report

[(NFP) consensus exp.: +850k // prev.: +1,371k]

[(unemployment) consensus exp.: 8.2% // prev.: 8.4%]

The consensus among analysts and economists this time around is calling for the first NFP print below 1 million jobs-added since the acute crisis in the spring; although, it should be said that there seems to be some wide variance in predictions as I’ve seen plenty of reputable sources calling for the number to come in above 1MM again as well. A drop below that big, round number isn’t necessarily indicative of a serious problem in the labor market, but I would expect it to make financial markets at least a little bit risk-averse in the context of recent signals that we’re seeing from wavering job growth in more frequently updated data. Again, if we go on recent weeks’ trends, this kind of flight to utmost safety is a negative signal for gold as investors will push anything of value into cash; but four days’ trading is more than enough time for that trend to shift back into gold’s favor.

The headline unemployment number, meanwhile, will likely persist at a steady state around 8%. While historically high, given the events of 2020 so far I think most economists will feel relatively satisfied with the measurable labor market having recovered to sub-10% so quickly.

FedSpeak this Week

It was last week’s steady drumbeat of warning coming from Fed Chairman Jerome Powell and other key FOMC members that kept the market in a downbeat mood throughout. We have no reason to expect the Fed’s public tone to shift in this this week’s speaking appearances, so we’ll be keeping an eye on if the market reaction is the same as well. Remember that, in last week’s run, the flight from risk created by a lot of this commentary left gold prices falling as investors reached for the Dollar above all.

Tuesday: Fed Vice Chair Richard Clarida (FOMC voter) (1140am EDT); New York Fed President John Williams (FOMC voter) (1pm EDT); Fed Vice Chair Randal Quarles (FOMC voter) (3pm EDT)

Wednesday: Minneapolis Fed President Neel Kashkari (FOMC voter) (11am EDT)

Friday: Philadelphia Fed President Patrick Harker (FOMC voter) (9am EDT)

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.