If the recent dynamic of rising rates, a firming dollar, and fading inflation expectations continues, it is only a matter of time until gold breaks down through the bulls’ ‘line in the sand’ at $1,680 and hits new lows for the year…analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.
If the market responds to Powell in a dovish manner that should send inflation expectations even higher, while the dollar and yields should pull back, which would all result in tailwinds on gold. However, a hawkish and ‘growth-insensitive’ Powell would likely send gold back down towards $1,700, potentially by Friday’s close…analysts at Sevens Report Research said in a note. Click here to read the full article.
If the dollar and Treasury yields continue to trend higher, it is only a matter of time before gold retests the 2022 lows…analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Stock futures are modestly lower thanks to some hawkish Fed chatter and another hot inflation print in Europe.
Economically, Spanish CPI jumped to 10.2% vs. (E) 9.2% in June, up from 8.5% in May suggesting inflation has not yet peaked, at least in parts of Europe.
Domestically, the Fed’s Mester reiterated that a 75 bp hike is likely in July given elevated consumer inflation expectations.
Today, there is one economic report to watch early: Final Q1 GDP (E: -1.4%) and investors would like to see the headline at least hold unchanged from the previous revision (if not get revised higher) before focus turns to several global central bankers speaking at an ECB Forum including Fed Chair Powell at 9:00 a.m. ET.
If the discussion takes on a more hawkish tone or there is any sign the market is losing confidence in the Fed (which would be evident in the bond markets) then yesterday’s selling pressure could continue.
What’s in Today’s Report:
Stock futures are solidly higher this morning, rebounding from last week’s more than 5% selloff while global markets stabilized following a mostly quiet weekend.
President Biden and St. Louis Fed President, Jim Bullard, both downplayed the threat of a severe recession on Monday which is helping drive risk-on money flows this morning while there were no market-moving economic reports overnight.
From a catalyst standpoint, there is just one economic report today: Existing Home Sales (E: 5.40M) and two Fed officials are scheduled to speak: Mester (12:00 p.m. ET) and Barkin (3:30 p.m. ET).
Bottom line, for this morning’s relief rally to continue today the market will need to see stable price action in bond markets, economic data meet or beat expectations and Fed officials to maintain an optimistic tone as that could see the S&P 500 test near term resistance between 3,780 and 3,840.
Looking ahead, the outlook for gold is still bullish and “the level to beat for futures to begin a new leg in the current uptrend is the 2022 high close of $2,058” an ounce, analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.
Ongoing concerns about price pressures and Fed policy expectations being dialed back slightly due to geopolitics are both strong tailwinds behind gold here…analysts at Sevens Report Research wrote. Click here to read the full article.
Gold is doing exactly what it should be doing right now, but it’s a much more mature asset and it’s got a proven history in these types of conflicts of how it trades…said Tom Essaye. Click here to read the full article.
A sharp rise in Treasury yields which begins to drive real interest rates higher is a “major risk to the gold market…analysts at Sevens Report Research wrote. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher following a generally quiet night as markets await the latest readings on inflation via today’s CPI and inflation expectations index in Consumer sentiment.
Economic data slightly underwhelmed as UK Industrial Production (1.3% vs. (E) 1.4%) and UK GDP (0.9% vs. (E) 1.0%) both missed expectations.
There were no notable Omicron updates overnight.
Today the focus will be on inflations via the Consumer Price Index (E: 0.7% m/m, 6.8% y/y) and the inflation expectations index in the Consumer Sentiment report (E: 67.0). Markets are already expecting the Fed to materially accelerate the pace of tapering of QE next week, but if these inflation readings come in much hotter than expected, that likely will be a headwind on stocks as it will only encourage the Fed to get even more aggressive in tapering QE.