August 9th Market Update


Inflation Data in Focus after Bullion Flash Crash

Metals closed last week under pressure from Friday’s positive jobs report. Pressure resumed for both gold and silver in early Asian trading hours. On Sunday evening, gold dipped by 4.4%, to around $1,693 an ounce. Gold has since bounced from those levels, which haven’t been seen since March. Right now, gold is near $1,732 an ounce.

Silver briefly dipped below the $23 mark, which was an eight-month low. Currently, silver is hovering around $23.50. Both metals saw pressure from the U.S. jobs report, and a stronger dollar. The better-than-expected jobs data has led some to believe that Fed tapering, and even rate hikes could occur sooner than expected. For this week, markets could once again react to Fed speak that confirms any of these suspicions. 

Stocks opened lower as momentum was compromised by coronavirus concerns. The Dow, S&P 500, and Nasdaq are all coming off record highs from last week, when equities were boosted by earnings and jobs data. The 10-year Treasury yield is also slightly lower today, after surging on Friday. 

It is a relatively light week in terms of scheduled economic events. Investor attention will likely shift to inflation data for this week. Consumer price index (CPI) data is set to be released on Wednesday, while the producer price index (PPI) is scheduled for release on Thursday. 

Given that jobs and inflation are two key metrics that central banks use when determining monetary policy, markets could be reactive to what the inflation data says mid-week. For Friday, the preliminary August U.S. Michigan consumer sentiment survey will be released. This will detail consumer sentiment, inflation expectations, and is expected maintain the current level near 81.2.

Several Fed officials are scheduled to give remarks on Monday, Wednesday, and Friday. Investors will look for hints as to when tapering or rate hikes could occur. In the past, U.S. equities have experienced more volatility when faced with the prospect of Fed tapering. Given the relationship between the dollar, inflation, and bullion, gold and silver enthusiasts will also be focused on this week’s round of U.S. economic data. 

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