GoldPrice.

Welcome back to the markets on a Monday, traders. Our charts look very different this morning than they did last week, so let’s jump right in.

At time of writing, gold prices are $15 lower on the day, having rebounded slightly from lows as deep as $1383 in the overnight session. The major sells off in the yellow metal and other safe-haven assets immediately followed the Sunday evening open and markets got their first opportunity to trade on Saturday’s news that the US and China will put recent trade-aggressions on hold and return to the negotiating table. As a result, the US Dollar is considerably stronger while equity markets rally. On the first day of July, gold prices have fallen by the most in a year. 

That’s no reason to pack it up and go home, of course. We’re seeing a great deal of exuberance in risk-assets today, but what clever observers are already pointing out should sink in before long: no trade deal has been reached between the globe’s two largest economies, there’s only the agreement in place to start taking each other’s phone calls again. There’s a lot of room for disappointment, given how large the market’s reaction has been.

All that remains to be seen, and I don’t expect a lot of additional headlines around negotiations this week because of the US holiday midweek. We can only deal with what’s in front of us of course, and we do have a few points of interest in this shortened week.

FedSpeak This Week

I’m putting FOMC appearances at the top of the running order this week for a couple reasons: 1.) the Thursday US holiday means the schedule is front-loaded, and 2.) Bullard and Powell’s comments last week were as important for precious metals and currency markets as any other input last week.

• While you were sleeping, Fed Vice Chair Richard Clarida spoke at a conference in Finland:

Federal Reserve Vice Chairman Richard Clarida, speaking in Helsinki on Monday, said many U.S. central bankers see a stronger case for easier monetary policy relative to the outlook just two months ago: https://t.co/jcsnzMEgXl #Fed #monetarypolicy pic.twitter.com/k2FWaf9lmA

— Kati Pohjanpalo (@pohjanka) July 1, 2019

• Tuesday, July 2 at 6:35am EDT // New York Fed President John Williams speaks
• Tuesday, July 2 at 11am EDT // Cleveland Fed President Loretta Mester speaks

US Economic Data to Watch

Monday, July 1 at 10am EDT // ISM Manufacturing Index (June)

[consensus expectation: 51.0 // previous: 52.1]

While the last two weeks saw a succession of deeply disappointing regional Fed surveys focused on the US manufacturing sector, the key ISM Manufacturing Index has been trending downward since the final quarter of 2018. Last month’s read was already just above the break-even of 50.0, so even the slight May-to-June decrease that’s anticipated seems unlikely to further rattle markets. The outside risk, however, is that the report dips into contractionary territory (sub-50.0.) That, I think, would spook some added safe-haven buying into gold markets.

Wednesday, July 3 at 8:15am EDT // ADP Employment Report (June)

[consensus exp.: +140k // prev.: +27k]

As usual, we’ll be watching the ADP release less to focus on the data itself and more in an effort to divine how Friday’s Jobs Report will look. If ADP rebounds from May’s brutally low miss, markets will likely price for a revived NFP number which would be bullish Dollar and bearish gold. We will keep in mind, of course, that the proven correlation between ADP and NFP is only in size and not direction, so a positive report on Wednesday does not guarantee one on Friday.

Wednesday, July 3 at 8:30am EDT // US Trade Balance (May)

[consensus exp.: -$53.5 billion // prev.: -$50.8 billion]

Full reporting on the US Trade Balance lags enough that it certainly won’t reflect any of this weekend’s course-change and given the notional size of the American economy, this is one of those enriching moments where I get to say, ‘three billion Dollars isn’t really consequential.’ But I after this weekend, it’s worth keeping the balance of trade number on your calendar as somebody in Washington may be using it like a drum to pound on, which could goose risk markets if everyone has not gone on vacation yet by then.

Wednesday, July 3 at 8:30am EDT // Initial Jobless Claims

[consensus exp.: +220k // prev.: +227k]

Different day of the week! Same (presumably) uneventful data read.

Wednesday, July 3 at 10am EDT // ISM Non-Manufacturing Index (June)

[consensus exp.: 56.0 // prev.: 56.9]

Those who have been able to look past data that points to a faltering American manufacturing sector have done so in part by suggesting that in this modern age the US economy as a whole is shifting its engine room from manufacturing to services—I’m not buying it myself, but that’s a talk for another day. So far in 2019, services PMI has run solidly above manufacturing and added some cushion to the Dollar. Recently, though, other surveys of the US service sector have looked less impressive even while the ISM remained (relatively) buoyant, meaning there is some risk of a catch-down effect this month. Manufacturing and services ISM both floundering near 50.0 would be a buy signal for safe-haven assets like gold.

Thursday, July 4

US Independence Day; US equity and bond markets to be closed, extraterrestrial invaders to be punched.

Friday, July 5 at 8:30am EDT // Jobs Report (June)

[non-farm payrolls consensus exp.: +158k // prev.: +75k]

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

I think we all expect a rebound from May’s—let’s be honest—absurdly low non-farm payroll number. By Friday morning, assuming no ugly surprises in Wednesday’s ADP data, something north of 110k added jobs will probably be priced into the market. Goldman Sachs’ economic team gets the same results from the eye test:

We believe the May report overstates the magnitude of the slowdown in trend job growth, which we believe remains well above potential.

The headline unemployment rate is expected to stay the course, give or take 0.1%. The real thing to look out for as a gold trader is where the gold chart is sitting ahead of Friday’s release. Even though what is notionally a large (more than 2x in many calls) increase in added jobs is anticipated, if gold prices have failed to recover from the Sunday sell-off and liquidity is lower than usual due to the Thursday holiday, the knee-jerk of algorithmic trading could conceivably crush gold prices below nearest support levels just ahead of the weekend. If you’re holding long gold positions—and after the past couple of weeks I suspect many people are—you’ll want to be aware of that dynamic ahead of time.

And that’s how the week lays out for us, traders. I wish you the best of luck out there (and a very happy Fourth, for those of you in the States,) and I’ll see you back here for a recap of the week.