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 on the price of gold this week and beyond, as well as other key correlated assets.

Gold prices on Monday are moderately lower than Sunday evening’s opening bids after a more volatile Sunday/Monday overnight than usual.

The selling pressure being exerted on gold here is likely a result of investors and managers positioning themselves ahead of Wednesday’s FOMC meeting, which is expected to be another pivot point from which the US Dollar could easily take yet another leg higher. We’ll also be on the lookout for more volatility late in the week than usual given that Friday is the last business day of July; and, practically speaking, this might be the last “fully attended” market week before the end of August.

For now, let’s take a look at the rest of the calendar ahead.

US Economic Data to Watch

Wednesday, July 27 at 2 pm EDT // FOMC Interest Rate Decision

[The FOMC is expected to raise the target range of their overnight interest rate by +0.75%.]

It feels like the FOMC meeting this week and the lens through which investors and other observers will view it, is not really about this week’s FOMC meeting. In the run-up to Wednesday afternoon, any pressure on the gold market is likely to be generated by investors and managers adjusting their positioning ahead of what’s expected to be another +0.75% hike, maybe accompanied by somewhat less hawkish messaging. We can see this happening already in gold’s Monday morning slide, and it’s likely to stay in play through the first half of the week thanks to a sparse data calendar before midweek. At the meeting/announcement itself, markets are pretty confident in the projection of another 75bps hike and will be more focused on how the central bank signals its plans for the September meeting. (Announcing rate hikes/cuts at the Jackson Hole Symposium, which effectively stands in for an August FOMC meeting, is usually reserved for emergency action.) Despite a recent run of top-tier macroeconomic data (and signals from the stock market) being used to argue that the US economy can continue to withstand the most (reasonably) aggressive level of Fed intervention against high inflation, the consensus is gravitating towards a “slower” hike of +0.50% in September. If the Fed is willing to signal as much in a post-meeting statement or (more likely) through Chairman Powell’s press conference, the news could see the US Dollar easing further back from July’s ripping bull run, allowing gold some breathing room to rise. Even if Wednesday’s happenings are decidedly as hawkish as recent Fed moves, sell-offs in the gold market may have run their course by the time Powell takes the podium, allowing the yellow metal to run relatively flat post-FOMC. The question, of course, would be: how far could gold drop by then?

Thursday, July 28 at 830am EDT // US GDP Growth (Q2 2022) (1st est.)

[consensus est.: +0.5% QoQ // prev.: -1.6%]

It seems reasonable to assume that more people tune in for the second game of the three-game series because at that point there’s the possibility of a result. There will be a similar dynamic at play on Thursday morning: after Q1 GDP resulted in contraction, with the consensus only just barely pulling for a QoQ uptick in Q2 GDP there’s a very real possibility that we see consecutive quarters of contraction in the US economy, which any high school econ student will tell you is “the definition of a recession.” (It’s a definition, at the very least.) The added attention increased the possibility of added volatility around this print on Thursday morning. A negative, contractionary number seems a likely tailwind for the gold market, which would look like attractive safety on the back of news that ought to push the USD back on its heels. Longer term, whether this GDP number means much of anything at all is really up for debate, given how healthy many other data sets paint the US economy to be despite a very hawkish Fed. Either way, the White House is, uh, tweeting their way through it.

Lol pic.twitter.com/IFvsee4By6

— Freezing Cold Finance Takes (@FreezingFinTake) July 25, 2022

Thursday, July 28 at 830am EDT // Initial Jobless Claims

[consensus est.: +255K // prev.: +251K]

Initial Claims will almost certainly be overshadowed by the GDP print happening at the same time this week, but for longer-term modeling, it will be useful to see if the weekly (estimated) rate of new unemployment claims at least stays tethered to 250,000/week or if it starts to run higher. A signal of labor market uncertainty could eventually push the Fed back from its currently hawkish projections and actions, changing the estimated trajectories for gold, Treasury yields, and the Dollar.

Friday, July 29 at 830am EDT // PCE Price Index (June)

[(core PCE) consensus est.: +4.7% YoY // prev.: 4.69%]

[(headline PCE) consensus est.: +6.7% YoY // prev.: +6.35%]

We’re looking for Friday’s PCE report—the “Fed’ preferred” calculation of inflation pressures across the US economy to echo the CPI data set for the same period (in terms of the number reported, of course; not the ugly surprise that it dropped on the markets.) The rate of core inflation will stay roughly on par with the month prior, thanks to prices for services like dining out staying tight and elevated; meanwhile, the more volatile “headline” number will have ridden eye-watering gas prices higher. This won’t really be “news,” and as such (especially on a Friday,) we would normally expect little in the way of movement to the gold market when it prints. That said, the prepared trader will allow the possibility that the Fed’s performance on Wednesday will shift how investors and analysts incorporate inflation data in their projections for the rate path and the normally dull PCE release (being the first opportunity to recalibrate) could be met with some increased volatility.

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.