Issue 13 – The week of May 9th, 2022

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Monday

• CAD building permits. A rise in building permits is bullish for the CA$.
• US wholesale inventories. Large inventories suggest an economic slowdown and are bearish for the US$.

Tuesday

• US weekly crude oil stocks. A fall in stocks would be bullish for precious metals and energies and bearish for the US$

Wednesday

• US Consumer Price Index. A key measure of inflation where a high reading is bearish for precious metals and bullish for the US$ and inverse for a low reading.

Thursday

• US Producer Price Index. Generally seen as a measure of commodity inflation where a high reading is bearish for precious metals prices and bullish for the US$ and inverse for a low reading.
• CAD Bank of Canada deputy governor speech. Markets will look for intentions of monetary policy strategy.

Friday

• US Michigan Consumer Sentiment Index. Measures how willing consumers are to spend money. A high reading is bearish for precious metals and bullish for the US$ and inverse for a low reading.

Geopolitics

Inflationary pressures, supply chain disruptions, Chinese zero Covid-19 lockdowns and the war in Ukraine continue to be the driving global economic drivers still.

The war is now in its 75^th day with fighting centred mostly in the eastern regions that border Russia. Long-range rocket attacks still periodically are hitting western Ukrainian cities such as Lviv. There are reports of Russia taking many tonnes of wheat that had been in Ukrainian storage facilities. Ukrainian wheat production is expected to take years to get back to previous levels.

Energy prices and shortages continue to compound. The author personally knows of gas stations that twice a month run out of gas to sell. The general rise in global commodity prices is helpful for precious metals markets but central bank interest rate policy changes take effect there will be more downward pressure on precious metals markets.

The Call

Precious metals prices have found a point of equilibrium after last week’s FOMC interest rate hike. Those prices are lower and still under a lot of pressure. It is a quiet week for reports, so look for markets to be driven by unscheduled geopolitical occurrences. Look for precious metals prices to drift slowly lower this week.

Last Week in Review

The most important moment last week was when the US Federal Reserve increased interest rates by half a percent or 50 basis points. This was the largest rate hike in 22 years. In the accompanying statement, they also added that the markets should expect future half-point rate hikes for the next few FOMC decision dates which are generally held about every five weeks. Precious metals markets began to price in this expected rate hike so fell early in the week and metals rallied when the rate was not hiked by a higher margin.

The Bank of England also hiked interest rates for the fourth time since last December.

	Gold	Silver
Open	1897	22.79
High	1910	23.30
Low	1850	22.11
Close	1884	22.39