Issue 49 – The week of January 23th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

• The biggest report weighing on Canadian precious metals prices this week will be the Bank of Canada’s interest rate decision and its accompanying statement. The two key factors will be if 1: they continue to hike the rate – likely a 25-basis point hike. And 2: how hawkish they are looking forward to the first half of the year. This will come out at 10:00 am on Wednesday EST. Metals markets have likely already priced in the expected a hike.
• On Thursday precious metals prices could experience an upswing day with the release of US GDP numbers. The GDP numbers are expected to decline which will be bearish for the US dollar, but precious metals prices should benefit from a release like this.

Geopolitics

The World Economic Forum (WEF) just wrapped up its annual meeting in Davos, Switzerland. Their read for the next year? The outlook is more optimistic than previously expected but the path ahead is fraught with potential perils. It sounds accurate. Many economies are rebounding. Travel continues to grow. Inflationary pressures have been receding for several months. Some of the hurdles ahead include the following events:

1. One of the most important is going to be the global central bank interest rate policy. There will need to be a concerted effort to give economies enough gas to keep accelerating without throttling them with unending interest rate hikes.
2. The war in Ukraine is quickly approaching its first anniversary. This action by the Russians continues to affect global supply chains negatively and will do so until there is some form of resolution.
3. Covid numbers out of China are particularly scary, especially given that they are Chinese nationals are now allowed to travel abroad. The concern this week is that it is Lunar New Year in China and millions of people are travelling, domestically and internationally. The possibility of another global pandemic moment must be taken into consideration for the next 12 months. Nobody wants to see that but pay attention to the news. We all have Covid fatigue, let us not revisit that moment in time.

The Call

Given last week’s strong Canadian Retail Sales figures the Bank of Canada has more reason to hike rates this week. The market feels that this will be the course they choose to pursue. Gold continues to look strong with good fundamentals to push it higher this week. Silver on the other hand is looking a little bit toppy technically. It has been a leading indicator for gold prices for some time now. Is this relationship starting to diverge? Or will gold turn downward? The call is divergence is beginning. Buy it before it gets more expensive.

Last Week in Review

• Gold had some ups and downs last week, as was expected, but still managed to make reasonable gains by Friday’s market close. Silver was unable to match gold with a loss on the week but far above the weekly low.
• China posted the first population decline since 1961. There is speculation that India has now surpassed China to be the world’s most populous nation. This was not expected to happen until mid-2023. Both countries have huge domestic precious metals purchasers by individuals for cultural events such as weddings.