Issue 37 – The week of January 9th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

It’s going to be a light week on the report front this week. The two most important releases will be Thursday’s US CPI and Friday’s Michigan Consumer Sentiment report. Both are key measures of inflationary pressures. The CPI report is expected to fall, and the Consumer sentiment is expected to rise. Given the recent precious metals price gains there will probably be a small sell-off as bargain hunters look for cheap equities.

Geopolitics

For the first time since 2020, Chinese travellers are venturing abroad. Given the surge in domestic Chinese Covid cases, there is a growing global concern for Covid resurgence among travellers from China. Countries in Asia are less reticent about admissions than western nations. Thailand for example has scrapped all Covid vaccination entry requirements today as the first planes arrive. The west, however, wants proof of vaccination and planes arriving in the USA also face tests of plane’s toilet water. Economies that are heavily reliant on tourism have been waiting for this moment.

On a macroeconomic basis, the world has also been waiting for this moment. Starved supply chains are eager to resume a steady supply of materials for manufacturing production. Increased supply will lower prices, which in turn lowers artificially induced inflation. China wants cash flow re-established. Not just for economic reasons but also to re-establish their global position as a world power. 2023 will be an uphill grind for China to regain “lost face” as is said in Asia.

The Call

Precious metals have had a very strong start to the year. They passed their first test last week with flying colours. The next test will be at the end of the week with inflation and consumer sentiment reports. As they are expected to be positive the question is how much of their gains will the precious metals shed? Look for a combination of market reaction to positive reports and profit-taking after strong gains. I’d stop loss orders that are sitting close to the market prices and could have an accelerated sell-off. If that happens look at it as a buying opportunity to make purchases. Again, look for buying the dip moments.

Last Week in Review

• Precious metals prices were mixed last week with gold having a very strong showing. Silver on the other hand had a volatile week ending in a slight loss. Silver no longer seems to be the leading market direction in precious metals markets.
• Canadian economy adds 104,000 jobs in December, much more than expected. The unemployment rate fell to 5.0%
• The USA adds 223,000 jobs and the unemployment rate dropped to 3.5%.