High Impact Events Trading... Gold & Copper

Exactly. I dont think a rate cut is coming today. I would think just a dovish statement at best!

Agreed. just HOW dovish? 🥴

The market is pricing in almost a 26% chance of a rate cut. up from under 20% earlier this week. Surprising.

No rate cut and a dovish statement. Gold is UP! I am happy!

We're close to hitting 2018 highs, imagine if the rate was cut

Infact highest since 2013 now!

June Final GDP Overview

This isn't an official preview, but it's worth going over. Tomorrow's US GDP report could impact the markets. The chances are better that there's a muted impact. This is the Final GDP figure. The Advance GDP comes out first and has the most impact, then the Prelim number follows that about a month later. It's basically a revision of GDP assumptions. After that revision, there isn't usually any significant changes to the GDP number. The markets would only react if the Final GDP number deviated significantly from forecasts.

I do not trade this event. There isn't that much opportunity in it. I went back and reviewed the reaction of gold during this Final GDP release. In March 2019, there was definitely a larger than normal move as the data came in worse than expected.

In Sept 2018, gold moved lower. The GDP figure was strong coming in at 4.2%. Final GDP came in as expected and Durable Goods higher than forecast. The GDP figure coming in at 4.2% was likely more of the cause of any gold selling/USD rally. That was the highest q/q of economic growth in the United States since 2014. At the time, there was speculation about the Fed hiking rates. In fact, they did a couple months later at the December meeting.

Now we are in a very different scenario. The Fed is likely going to cut rates in the July meeting, regardless of what the GDP data shows.

Again, this isn't an event that normally offers a lot of opportunity for any metals trading. I will be sitting on the sidelines for this one. Good luck guys!

It certainly did impact the market, 1400 resistance held up though:

EventsTrader....I see RBA is forecast to cut rates again tonight. Could you show us how does it effect Gold historically. TIA

Sure. Historically, the RBA rate decisions don't move gold as much as you'd think. But tonight's decision is interesting because the market has only priced in 77% that the RBA will actually cut rates.

Events:

1. RBA Cash Rate
2. RBA Rate Statement

Overview:

The markets are mixed on whether or not the RBA will cut rates. While most believe they will cut rates, 23% still believe they'll keep rates unchanged. That means will like most certainly see volatility in the markets, specifically the aussie. The risk is that they keep rates on hold. In that case we could see metals impacted. However, the impact will likely be seen more in copper than in precious metals if history is any indication.

Here's how gold reacted to the last three rate decisions from the RBA:

June:
May:
April:

While there wasn't much impact to copper in June, the previous two meetings caused some whipsaw action:

May:
April:

Conclusion:
Based on the recent history of the RBA impact, it doesn't seem likely that gold will move much on the decision. Copper is more likely to be impacted, and whipsaw action is a possibility. I'd recommend not trading this event, but it will be an interesting one to watch. Good luck out there!

Excellent analysis. Thanks EventsTrader.

US ADP Non-Farm Employment Change July Preview

US ADP Non-Farm Employment Change - Wednesday 8:15am ET

Data Expectations:

1. The market is expecting ADP to come in at 140K.
2. The range estimates is from a low of 57K to 190K.
3. Excluding outliers, the range of estimates is from about 112K to 162K.
4. Last month’s 27K was the worst ADP number since Oct. 2010. The 27K was vs 185K consensus estimate.

Notes:

1. Monthly variations in the ADP number is not uncommon, but it’s accompanied by lower 2Q GDP, falling PMI indexes, and US-China trade disputes negatively impacting business sentiment.
2. With interest rate uncertainty, the strength of the labor market will remain a key component for any hawkishness from the Fed.
3. A surprise to either side of the forecast is likely to cause volatility, as both a stronger and weaker number could have monetary policy implications.
4. The risk is probably skewed to a weaker print. A continued decline the jobs data, could trigger some fear about a recession and possibly pricing in a greater chance of deeper or quicker rate cuts.
5. While ADP is thought of as a precursor to NFP, the correlation breakdown is too frequent and cannot be relied on with any significant degree of confidence.
6. The correlations tend to coincide more that usual during times of drastic changes in the conditions of the labor market.
7. Last month's 27K is an anomaly in the data series and will be susceptible to upward revisions.

Recent Impact History:

June

May

April

Conclusion:
Gold generally moves on the data but the recent history shows that these moves have been rather limited. There's risk in a lower than expected number. But a lower number might be accompanied by an upward revision. A good recipe for a whipsaw. Conversely, if ADP surprises to the upside and last month's 27K is revised higher, there's also some risk of gold prices dropping.

While there's potential for gold prices to be impacted, the evidence shows that it's rather limited. The moves are not worth the risk. I'm advising caution. Not a lot of trade potential here.

Good luck out there!

Spot on brother, nice heads up

At some point today I will leave 4th of July festivities and preview NFP. Tomorrow is tricky because Wage inflation has been so important. Also the Canadian labor data is due out at the same time. Stay tuned...

US Employment Data - July Preview

Three major releases due out Friday 8:30am ET are:

1. Non-Farm Employment Change
2. Unemployment Rate
3. Average Hourly Earnings m/m

Data Expectations:

1. Market is expecting NFP to bounce back from last month's 75K dismal reading.
2. NFP forecasts vary, but the market consensus estimate is right around 162K.
3. Economists forecasts generally fall between 100K and 220K.
4. It's important to note, most estimates were turned in by the 28th. However, there were about a dozen that came in on July 2nd that appeared to be forecasting a slightly higher number. The later forecasts should be weighted with greater significance because they're usually done with more information than others previously submitted. There's not enough evidence to confidently predict a higher reading, but I wouldn't be surprised. I explained in this post how later forecasts move the median slightly, but don't represent the potential for a surprise based on the latest information.
5. Take it with a grain of salt, but these late forecasts coming in higher is a sign we could see a surprise to the upside.
6. The unemployment rate, the least important of the three, is expected to remain steady at 3.6%. When the rate hit 3.6% in May, it was the lowest since 1969.
7. Average Hourly Earnings are expected to tick up to 0.3% from last month's 0.2% reading.
8. About 75% of economists surveyed agree on the 0.3% forecasts. However, 13 are predicting 0.2% while only 3 economists submitted estimates of 0.4%. The rest of the forecasts were for 0.3%. Forecasts are slightly skewed in terms of any deviation from forecasts. It seems like the risk could be to the downside.
9. Also to note, of the ten forecasts delivered after the weekend, eight were for 0.3%, one for 0.4%, and one was calling for a lower reading of 0.2%. Assuming these later surveys were handed in with more information than previously submitted forecasts, there's a strong indication we could see wages meet market expectations.

Key Points:

1. Last month's NFP number missed bad, coming in at 75K vs 177K estimates.
2. Keep in mind NFP data could see a boost from temporary federal government hiring for the US Census Bureau's 2020 count.
3. If the unemployment rate improves, it could trigger larger than normal moves since headlines will be focused on how it's the best unemployment rate in over 49 years. The media could run with that, when in reality the change is tough to decipher due to rounding. It could be 3.56% to 3.54% (due to rounding). It could take time for the markets to digest a tick up in the unemployment rate until the extent of the change is known.
4. The rate and the NFP number have been known to cause a large whipsaw when they surprise to opposite sides of the forecasts.
5. Wage inflation has been very important not only in the US but globally for quite some time. Average Hourly Earnings has the potential to move the markets just as much as NFP, although it usually doesn't because the data tends to come in relatively close to what markets expect.
6. Any deviation in the hourly earnings figure will have impact, although a miss by 0.2 or greater is when it could take center stage and reverse any moves from the other data.
7. In Feb, NFP surprised big to the upside, but Average Hourly Earnings came in at 0.1% vs 0.3% expected. Gold quickly reversed after spiking down on the initial data, then just showed volatility without really taking a direction. The moves were related to the US dollar inverse relationship. They usually are for these types of data releases. The exception is when the data is so bad or good it triggers a change in market sentiment and money flows in or out of gold.
8. This is the last jobs data before the next FOMC meeting later in July. US payroll data is a critical input used by the FOMC. This month could have more impact than usual.
9. June started on Saturday the 1st, and ended on a Sunday. With fewer working weekdays, wage growth should be susceptible to upside risk.
10. ADP report and June's unemployment claims are telling two different stories. While June's jobless claims continued to post relatively low levels, the ADP data showed a much worse than expected data, coming in at 102K vs 140K estimates.
11. The general sentiment as of today, is that this NFP report is a very important data point and could change sentiment about the July rate cut, or extent of the cut.
12. Most market participants are expecting the jobs data to show some signs of continued weakening in the labor market. The reasons for the sentiment has to do with global manufacturing data continuing to decline, but also the US trade tensions with Mexico and China.
13. Trade tensions with Mexico and China were mounting earlier in the month, and probably weighed on business sentiment which negatively impacted hiring decisions. The appreciation in gold prices throughout June are a pretty good indication that there might be some truth to that.
14. Be cautious and keep your eye out for large deviations from forecasts in the Canadian data. Canada's data is being released at the same time. It usually doesn't impact metals but it has the potential on a big enough surprise.

Impact from March through June:

The charts below show how Gold prices moved on the release in each month going back to March. May was the only month where copper was impacted and is included below.

March - Gold prices moved higher after a much weaker than expected NFP. A better than expected number in both Unemployment rate and Average Hourly Earnings were overshadowed by the weakness shown in the NFP data. As the US dollar fell, gold went up.

April - April's release is a great example of the risk involved when Average Hourly Earnings and NFP each come in one stronger and one weaker than forecasts. A whipsaw ensued. Never fun.


May - May was a big one and still a little bit of a mystery. NFP came in around 80K higher than expected and the unemployment rate hit a 49-year low. Average Hourly Earnings tick down and missed forecasts by 0.1%. Despite the strong jobs data, Gold and copper rallied on the heels of the US dollar sell off. Most believe it was the weaker wage inflation that caused traders to start pricing in more easing. That explains the copper move.


June - Gold spiked a little higher after the US dollar took a hit on weaker than expected NFP data and a miss in Average Hourly Earnings.


Conclusion:
This month jobs data gets more scrutiny as the health of the US labor market could impact the extent of any rate cut during the FOMC meeting later this month. 70% of the market believe the fed will only cut rates by 0.25%. On a weak reading the market could start pricing in a greater chance of 50 basis point rate cut. On strong data, the probability for a 25 basis point cut should rise.

Any rally in gold from a weaker than expected jobs report could see some follow-through. If the data surprises to the upside gold prices could move lower. The extent of any move lower might be limited. Currently, global uncertainty has been and will probably continue to support gold prices. Keep in mind too, whipsaws are always a possibility! As always, caution is advised.

Good luck out there fellow traders!

Thanks EventsTrader.

Always appreciate knowing other traders are reading these previews. Glad to see you here benlong! All the best.

Thank you Events Trader

Thank you for stopping by manize! The door to this thread is always open. All the best!