SilverPrice.

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 other key correlated assets.

Gold prices are taking another steep slide lower this morning, pressured lower by the US Dollar’s continuing surge and US Treasury yields climbing (the benchmark 10-year yield is over 2.9% this morning) as investors prepare for the Fed to again raise interest rates on Wednesday in its campaign against inflation.

Let’s take a look at the rest of the calendar ahead.

US Economic Data to Watch

Monday, May 2 at 10am EDT // ISM Mfg. Index (Apr)

[consensus est.: 57.6 // prev.: 57.1]

Observers and economists are looking for the ISM manufacturing PMI to show some signs of life in a rebound from the March data, which reported the slowest growth in American’s industrial sector since the fall of 2020. (It’s important to keep the context in mind, however, which is that even the recent “lows” still reflect strong pace of growth.) Another negative surprise this week, as it comes far enough ahead of Fed Day or the Jobs Report, might pump some risk-off uncertainty into markets. Before April that might’ve been a bullish signal for gold, but with the US Dollar remaining the key safe-haven at the moment and Treasury rates staying high it’s tough to expect anything to really boost gold prices acutely.

Wednesday, May 4 at 815am EDT // ADP Employment Report (Apr)

[consensus est.: +395K // prev.: +455K]

Wednesday’s ADP number, while informative for deeper or varied looks at the US labor market (think, the NFP number but exclusive to private businesses,) isn’t going to tell us anything about the state of the jobs recovery that will: a.) change the key Jobs data due on Friday, or b.) influence the decision-makers at this week’s FOMC meeting. Still, that won’t stop some sections of investors from overreacting to an ADP print above or below expectations. (It never has.) There’s no good use in trying to make a direction call for gold here; primarily, it’s just smart to keep an eye out for added volatility around the release on Wednesday morning.

Wednesday, May 4 at 2pm EDT // FOMC Interest Rate Decision

[The Federal Reserve is expected to raise interest rates.]

A consecutive interest rate hike from the FOMC, most likely by an unconventional +0.50%, is about as "baked into" market expectations as a thing can get without having already happened. It’s also probably baked into the current market prices for key asset classes, too, and this might be the silver lining in the yellow metal’s recent slump: another aggressive interest rate hike is, generally, a negative signal for gold’s price path—as are other actions that the Fed seems set to take either this week or later in 2022, such as the start of balance sheet reduction, which tighten monetary conditions in the economy. It’s possible, though, that the May 2022 hike is accounted for in gold prices as they begin the week, in which case gold holders may be spared a steep drop when the Fed’s announcement hits the transom on Wednesday afternoon. Regardless, traders can definitely expect some volatility in gold alongside the US Dollar and Treasury yields, in an initial burst following the 2pm decision, and then in more prolonged activity during Chairman Powell’s post-meeting Q&A.

Friday, May 6 at 830am EDT // April Jobs Report

[(NFP) consensus est.: +390K // prev.: +431K]

[(Unemployment) consensus est.: 3.5% // prev.: 3.6%]

It’s rare that a monthly jobs report comes down and feels sort of inconsequential but, at least in terms of the lens through which we track markets and macro here, the April report coming Friday puts it in a bit of a limbo space: the Fed has made clear how important a strong US labors situation is to the central bank’s will to enact aggressive tightening in an effort to combat inflation, and the monthly payroll data will be one of the primary means of measuring that. But April’s data comes too late to be taken into account at this Wednesday’s FOMC, and will stale by the time the committee opens the debate in June (by which point we’ll have seen the May report.) That said, independent of the FOMC reaction function there’s always a possibility for a bad miss or a strong beat in the Jobs Report to move investors into or out of the currently-ripping Dollar so—as has become the refrain this week—be aware of these particular points in the calendar with a high likelihood of volatility in the Greenback and, as a result, the spot price of gold.

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.