Happy Monday, 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 on the price of gold this week and beyond, as well as other key correlated assets.
Gold prices saw a brief uptick in the overnight sessions as markets reeled back on last week’s sharp rally in Treasury yields, but that correction and its boost to the yellow metal faded before New York trading began, and now we see gold spot prices roughly flat to last week’s close.
Elsewhere, US stocks continue to trudge higher, aiming for the 11th consecutive day of gains in the Dow Jones Average. We expect the first half of the trading week will be ruled by the relative calm we’re seeing on Monday, as traders and managers sit on their hands ahead of a key FOMC decision on Wednesday afternoon.
US Economic Data to Watch
Wednesday, July 26 at 2 pm EDT // FOMC Interest Rate Decision
[The consensus broadly expects the FOMC to hike the Fed’s primary policy rate by +0.25%]
The majority of public comments and testimony from key FOMC officials over the last month has pointed clearly to the central bank’s intention to hike interest rates by the “standard” increment of 25 basis points this week after hitting the pause button for just a single meeting. Given the effort that the FOMC has made to communicate forward guidance regarding this specific meeting, the incremental tightening is likely priced into most assets, including gold and the major indexes of the US stock market, by now. Especially after the steep climb in US Treasury yields that we saw last week. What’s less certain—and therefore more prone to driving market volatility in the yellow metal and other Dollar-tied instruments—is whether Fed Chair Powell will give any more clarity to his suggestion for the Fed to raise rates this year at a “careful pace.” At the moment, the debate appears to be whether this means hiking at every-other meeting for now or just continuing to pencil in +0.25% each meeting until pushed to do otherwise. If Powell hints at the every-other-meeting option, we could see both a risk-on push higher in US stocks and a rally in gold prices, as this would imply no hike at next month’s summit in Jackson Hole and will likely be interpreted as a chance for cooling inflation data to compel the Fed to reconsider an earlier halt to the hiking cycle altogether.
Thursday, July 27 at 8:30 am EDT // US GDP Growth (Q2 2023) (Adv.)
[consensus est.: +1.8% QoQ // prev.: +2.0%]
Coming hot on the heels of an important FOMC meeting, we can expect a higher chance of market volatility around Thursday’s initial calculation of GDP growth in the US economy last quarter. Although an as-expected print, or even a moderate beat, probably doesn’t move the needle (aside from maybe boosting stock prices, briefly,) particularly if Powell and the FOMC spend any airtime on Wednesday suggesting that the central bank’s remaining hiking path with be sensitive to changes in economic data, a disappointing number will probably offer a tailwind to gold alongside a weakening US Dollar.
Friday, July 28 at 8:30 am EDT // PCE Price Index (June)
[(core PCE) consensus est.: +0.2% MoM // prev.: +0.3%]
[(headline PCE) consensus est.: +0.2% MoM // prev.: +0.1%]
Because inflation data will certainly be top-of-mind in the FOMC’s organized statement and in Chair Powell’s post-meeting press conference, it’s difficult to look through that major unknown to predict how markets will react to Friday’s PCE data set (which, as always, is most likely to report in-line with the consensus projections.) We’ll look for some volatility around Friday morning’s print, especially in the Dollar and in US Treasury prices—both of which could impact the gold chart—but any rolls or rallies will probably be short-lived as trading cools on another summer Friday.
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 next week.