Issue 48 – The week of January 16th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

There will be no reports on Monday from the US as it is the Martin Luther King holiday, so expect a quiet trading session.

• Tuesday will see Canadian CPI (Consumer Price Index) report released. The market is looking for a drop in prices which will be beneficial to the CAD dollar and detrimental to precious metals.
• Wednesday will see US CPI and Retail Sales. Both are expected to show declines in inflationary pressures with evidence of increased spending. Again, detrimental to precious metals in theory.
• Friday sees CAD Retail Sales released. Look for increased consumer spending, as the report will be for December which historically has increased holiday shopping.

This could be the final bit of pressure on precious metals prices for the week.

Geopolitics

So? Where to begin? How about the elephant in the room that nobody wants to acknowledge? Yes, the two words that both start with the letter “C”. You guessed it. China and Covid. After an about-face on their zero Covid policy two important things have occurred. The re-opening of China is important to restoring supply chains. This will not be an easy engine to restart. Firstly: last week Chinese nationals started to travel abroad again. The second and possibly more concerning news is that the Chinese acknowledged 60,000 Covid related deaths last month. The world should be paying attention to both of these highly interconnected moments. There could be some profound consequences for all of us.

The war in Ukraine is looking like it is about to enter a new phase of intensified aggression. Russian strikes on non-military targets are increasing. Western military assistance to Ukraine is increasing. Britain and Germany are sending tanks. Canada will buy surface-to-air missiles from the US and donate them to Ukraine. Putin’s “three-day” incursion isn’t going to end anytime soon. Supply chains from that part of the world are not going to resume anytime soon. Commodity markets will be affected for a long time by this war.

The Call

Precious metals certainly look strong, but this week looks like it is a good moment for profit-taking. With the week’s reports expected to be mostly negative towards precious metals prices it looks like a good moment to take profits off the table. Savvy investors should look for bargain-hunting moments below the 1900 handle.

Last Week in Review

• A second strong week for precious metals to start the year off. Gold punched significantly higher on weak inflation data well into the 1900 handle.
• China began to allow its nationals to pursue international travel again.