(Kitco News) – Gold and silver head into the coming week with investors focused on inflation, economic growth and Federal Reserve policy, as July PCE data and Fed Chair Kevin Warsh's Jackson Hole speech could drive volatility across precious metals markets.
Bullion prices rallied sharply this week as a weaker U.S. dollar, fading expectations for a September Fed rate hike and concerns over the U.S. fiscal outlook supported precious metals. The yellow metal broke above $4,500 an ounce following Wednesday's Treasury buyback announcement and traded above $4,600 on Friday afternoon, while silver held above $69 an ounce and touched the $70 level.
The coming week's economic calendar will offer fresh readings on consumer confidence, housing, inflation and economic growth, while Friday's Jackson Hole speech could provide the clearest indication of how new Fed Chair Warsh is weighing persistent inflation against recent signs of weakness in the labor market.
The U.S. calendar is quiet Monday before attention turns Tuesday to the Conference Board Consumer Confidence Index and New Home Sales. Housing and consumer confidence offer important signals on the impact of elevated borrowing costs and persistent inflation on households. Further weakness could reinforce expectations that the Fed will remain on hold in September, while stronger readings could support the view that economic activity remains resilient.
Wednesday morning brings the week's heaviest concentration of economic data, with the Core PCE Price Index, the second estimate of second-quarter GDP and Durable Goods Orders all scheduled for release.
Core PCE is likely to receive the most attention as the Federal Reserve's preferred measure of underlying inflation, with another subdued monthly reading likely supporting the argument that policymakers can remain patient. Second-quarter GDP will also be watched for revisions after the advance estimate showed the economy expanding at a 1.5% annualized rate, down from 2.1% in the first quarter, while durable goods orders will provide another look at business investment and manufacturing demand.
Thursday brings weekly jobless claims, which remain one of the timeliest measures of labor market conditions. Initial claims fell to 206,000 last week, pointing to relatively limited layoffs even as other employment indicators have shown signs of softer hiring.
The week's main event will likely be Fed Chair Kevin Warsh's Friday morning speech at the Kansas City Fed's annual Jackson Hole symposium, with markets looking for clues as to the timing of the Fed's next move. Warsh has avoided providing explicit forward guidance since taking over as chair, leaving investors focused on how he characterizes inflation, labor conditions and the balance of risks ahead of the September FOMC meeting.
Friday morning with also feature the preliminary annual benchmark revision to nonfarm payrolls, which will tell markets whether the previously reported U.S. employment figures have been overstated or understated. The revision could take on added significance following recent signs of weaker hiring and could influence expectations for Fed policy if it points to a materially softer labor market.
The week concludes with the University of Michigan's final Consumer Sentiment reading for August. Preliminary sentiment fell sharply to 51.0 from 55.2 in July, while year-ahead inflation expectations edged up to 4.3%. The final reading will offer another indication of how persistent inflation and economic uncertainty are affecting U.S. households.
For precious metals, next week's releases will largely be viewed through the lens of their implications for Federal Reserve policy. Softer inflation, weaker consumer data or a downward payroll revision could reinforce expectations that rates will remain unchanged and provide further support for gold. Stronger growth data, persistent inflation pressures or a hawkish message from Warsh could revive rate-hike expectations and create near-term headwinds for gold and silver.
Economic data to watch next week:
Tuesday: Consumer Confidence, New Home Sales
Wednesday: Core PCE Price Index, Q2 GDP 2nd Estimate, Durable Goods Orders
Thursday: Weekly Jobless Claims
Friday: Fed Chair Warsh Jackson Hole Speech, Nonfarm Payrolls Prel. Annual Revision, University of Michigan Final Consumer Sentiment
