Week Ahead: Big Week For Gold As Jackson Hole Looms

It’s that time of the year people!

All eyes will be on the annual Jackson Hole Economic Symposium where central bankers and financial heavyweights discuss key economic issues that impact the world. Given how this major event could offer investors fresh insight into the Fed’s thinking on rates and inflation, get ready for a potentially wild week for financial markets. Before we take a deep dive into what to expect from Jackson Hole Symposium, here are the scheduled economic data releases/events in the coming week:

Monday, 22 August 

• CNH: China loan prime rates
• GBP: UK Foreign Secretary Liz Truss and Rishi Sunak Campaign

Tuesday, 23 August 

• EUR: Eurozone S&P Global PMIs, consumer confidence
• GBP: UK S&P Global/CIPS UK PMIs
• USD: US new home sales, S&P Global PMIs, Minneapolis Fed President Neel Kashkari’s speech

Wednesday, 24 August 

• ZAR: South Africa CPI
• USD: US durable goods, pending home sales
• Oil: EIA oil inventory report

Thursday, 25 August 

• JPY: Japan PPI
• Jackson Hole Economic Policy Symposium, Wyoming
• EUR: Germany GDP, IFO business climate, ECB minutes
• USD: US GDP, initial jobless claims

Friday, 26 August 

• NZD: New Zealand consumer confidence
• Fed Chair Jerome Powell’s Speech at Jackson Hole
• NGN: Nigeria’s GDP
• USD: Consumer income, University of Michigan consumer sentiment

The main risk event and potential market shaker could be Federal Reserve Chair Jerome Powell’s speech at Jackson Hole on Friday, August 26th.

Investors have many questions for the Fed thanks to the latest developments revolving around inflation and the US labour force. According to the Fed minutes for July’s meeting, policymakers saw inflation as a significant risk to the economy and indicated they would remain aggressive until the beast was tamed. However, inflation in the United States cooled to 8.5% in July, encouraging traders to cut bets over how aggressive the Fed will be on rates. In regards to the jobs market, it defied recession fears with NFP increasing 528k in July. This has split expectations over the size of the next rate hike in September. Market players need clarity on how big future rate hikes will be and the strength of the US economy in the face of high inflation.

We expect many assets to be influenced by the Jackson Hole but our attention falls on gold. Powell’s remarks could be the fundamental spark the precious metal has been waiting for these months. Markets are still pricing in a 52% probability of a rate hike in September but the Fed could use Jackson Hole to shift the scales. If Powell strikes a hawkish tone and reinforces expectations around the Fed moving ahead with another jumbo 75 bps hike, this could drain appetite for zero-yielding gold. Alternatively, a cautious sounding Powell may reduce the odds of a jumbo hike, providing some support to gold.

Prices are already under pressure on the daily charts and heading for their first weekly decline in five. The precious metal could be in store for more pain ahead of Powell’s speech if the dollar continues to appreciate. Talking technicals, $1740 remains a level of interest in the short term.

Pulling our focus away from the Jackson Hole and gold, there are a couple of key economic reports from major economies to keep a close eye on. We could see some volatility across currency markets in the run-up to the Symposium due to this.