Issue 36 – The week of October 17th, 2022

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Monday

• CAD Bank of Canada deputy governor Rogers speech.

Tuesday

• US Redbook index. A private analysis of retail sales is used to help verify government retail sales reports. Strong sales are a sign the economy is healthy but could put upward pressure on inflation is bullish for precious metals.
• USA Weekly Crude Oil Stocks. API’s Weekly Statistical Bulletin (WSB) has reported total U.S. and regional data relating to refinery operations and the production of the four major petroleum products: motor gasoline, kerosene jet fuel, distillate (by sulphur content), and residual fuel oil. These products represent more than 85% of the total petroleum industry. Stocks down are good for precious metals.

Wednesday

• CAD Consumer Price Index. The Consumer Price Index (CPI) released by Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (of 1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.
• CHINA. The PBoC Interest Rate Decision is announced by the People´s Bank of China. If the PBoC is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the CNY. Likewise, if the PBoC has a dovish view of the Chinese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

Thursday

• CAD ADP Employment Change. The Employment Change released by Automatic Data Processing, Inc is a measure of the change in the number of employed people in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. So a high reading is traditionally seen as positive, or bullish for the CAD, while a low reading is seen as negative, or bearish.

Friday

• CAD Retail Sales. The Retail Sales released by Statistics Canada is a monthly data that shows all goods sold by retailers based on a sampling of retail stores of different types and sizes. The retail sales index is often taken as an indicator of consumer confidence. It shows the performance of the retail sector in the short term. Generally speaking, positive economic growth anticipates bullish movements for the CAD.
• USA CFTC Net Gold Positions. The weekly Commitments of Traders (COT) report provides information on the size and the direction of the positions taken, across all maturities, with participants primarily based in Chicago and New York futures markets. Forex trades focus on “non-commercial” or speculative positions, to determine whether a trend remains healthy or not, and also market sentiment towards a certain asset.

Geopolitics

In China Xi Jin Ping is set to secure his third term as president being the first person since Mao to hold the office that long. He will have his work cut out for him. China is coming apart at the seams facing a plethora of problems. These range from a failed zero Covid policy that is disrupting the economy, manufacturing and supply chains as well as a hyper-inflated real estate bubble that looks set to implode soon. China’s star seems to be losing its lustre. Don’t forget they still are the second-largest economy on the planet and have very deep pockets.

There is a growing push to start recycling components from the estimated 5 billion cell phones that will become redundant this year. Those phones will be replaced and if recycling does not happen all those components will have to be mined from the earth. Many people do not actively dispose of their phones when they upgrade to a newer device. This will become a growth industry going into the future as redundant phones will be low-hanging fruit for recovering previously mined materials. Costs will be lower than mining in what will be more and more remote locations around the globe and the associated refining costs for such elements.

The UK seems to be in significant trouble as confidence in the Truss government erodes at a remarkable pace since the introduction of the mini-budget. The Bank of England has had to intervene on behalf of the pound after a big sell-off last week. Calls from within the Tory party for the PM to resign are growing with each passing day. It appears it’s only a matter of time until the current government fall. Sterling has rallied in early Monday trading as an anticipated policy statement from newly appointed chancellor Jeremy Hunt will announce new taxes and spending measures.

The Call

Precious metals continue to remain under pressure in the face of a still surging US dollar along with rising crude oil prices. Last week’s rout in metals prices has left them at critical technical support levels. If markets have a weekly close below last week’s close a continued sell-off looks to be primed to occur. Gold will have its work cut out to try to get back over the 1700 handle as too will silver getting back over the 19.00 handle. For the moment though any strength looks like a place to sell.

Last Week in Review

• Precious metals started the week off on a rough note and had sustained losses right through to Friday’s close
• The 20^th Congress of the Chinese Communist Party started when Xi Jin Ping is expected to be anointed for a third term as premier
• The British pound tumbled as the UK chancellor is fired after presenting a mini-budget which was then rescinded
• Saudi Arabia announced oil production cuts but it looks like their production level was unsustainable and they scaled back to a level they can maintain

	Gold	Silver
Open	1696	20.13
High	1697	20.14
Low	1640	18.07
Close	1647	18.38