Issue 38 – The week of October 31st, 2022

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Monday

• No reports of note

Tuesday

• CAD S&P Global PMI (Purchasing Managers Index) Markit Manufacturing PMI, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies. An index reading above 50.0 indicates an overall increase in that variable, below 50.0 an overall decrease. All data are seasonally adjusted.
• 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

• USA ADP Employment Change. The Employment Change released by the Automatic Data Processing, Inc, Inc is a measure of the change in the number of employed people in the US. 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 USD, while a low reading is seen as negative, or bearish.
• USA Federal Reserve Interest Rate Decision. With a pre-set regularity, a nation’s Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. In the US, the board of Governors of the Federal Reserve meets​ at intervals of five to eight weeks, during which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of healthy inflation. A rate cut on the other hand is seen as a sign of economic and inflationary woes and therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC statement, and whether the tone is hawkish, or dovish over future developments of inflation.

Thursday

• UK Bank of England Interest Rate Decision. With a pre-set regularity, a nation’s Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. A rate hike tends to boost the local currency, as it is understood as a sign of healthy inflation. A rate cut on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the BOE statement, and whether the tone is hawkish, or dovish over future developments of inflation.

Friday

• CAD Net Change in Employment. The employment Change released by Statistics Canada 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 which stimulates economic growth. Therefore, a high reading is seen as positive, or bullish for the CAD, while a low reading is seen as negative or bearish.
• CAD Unemployment Rate. The Unemployment Rate released by Statistics Canada is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market. As a result, a rise leads to a weakening of the Canadian economy. Normally, a decrease in the figure is seen as positive (or bullish) for the CAD, while an increase is seen as negative or bearish
• USA Nonfarm Payrolls. The nonfarm payrolls released by the US Bureau of Labor Statistics presents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to their high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months’ reviews ​and the unemployment rate are as relevant as the headline figure, and therefore market’s reaction depends on how the market assets them all.
• 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

Supply chain routes continue to face further hurdles as millions face lockdown in China as Xi Jinping signals there will be no relaxation of the controversial zero Covid policy. To further exacerbate matters Ukrainian grain shipments are now at risk after Russia suspended their involvement in the deal to allow the grain to be transported.

About the war in Ukraine, we are watching a sea change in the way war is waged. Conventional tactics have not worked for Russian forces. After seeing the success, the Ukrainians have had the Russians are beginning to fully embrace drone warfare. Drones come in all shapes and sizes and can be designed for specific tasks. They are relatively cheap and remotely controlled. You can be sure every military around the world is watching how things change day to day. The one thing they all have in common is sophisticated electronic systems which require precious metals for electronic connections between internal components.

The Call

The latter half of the week could prove to be quite volatile with interest rate decisions from the US and the UK. At the end of the week, this will be followed by employment reports from Canada and the US.

For the moment precious metals remain under significant pressure as the US dollar remains a global financial safe harbor in these fluid markets. Given precious metals’ resilience to hold current levels beginning to scale into positions at these levels is probably a good time to take action.

Last Week in Review

• Precious metals last week gave back gains made the previous week
• Russia announced it is suspending involvement in the internally brokered deal to allow Ukraine to export grain after an attack on their ships in the Black Sea

	Gold	Silver
Open	1661	19.46
High	1674	19.76
Low	1637	18.77
Close	1643	19.21