Issue 61 – The week of April 17th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

• The latest updates on the housing market will become available, including March housing starts, building permits, existing home sales and NAHB’s Housing Market Index for April.
• We will also get inflation readings from the U.K., Eurozone, and Japan. Also, first quarter GDP figures from China.
• Monday will see the release of the Empire State Manufacturing Index for April, NAHB Housing Index and China’s GDP growth Rate. Also of note, the U.S. Supreme Court will hear arguments in Slack vs. Pirani, a complex securities law case that could determine the future of direct stock listings in the U.S. Canada Wholesale Trade is due out for February.
• Tuesday will see the release of CAD CPI with mixed expectations from market participants for the result. The number is not expected to rise or fall very much. Also note that the US Housing Starts (March) will be released and are expected to show a softening to 1.4 million from 1.45. Buildings Permits (Mar)will be released and consensus is lower at 1.45 million from 1.52 million.
• Wednesday will see U.K. Inflation Rate (Mar) and the Euro Area Inflation Rate (Mar). Later in the day, the US Fed Beige Book will be released.
• Thursday will see Weekly Initial Jobless claims with consensus of 244,000 vs 239,000 the previous week, Philadelphia Fed Manufacturing Index (Mar) and Existing home sales expected to show a slowing to 4.48 million from 4.58 million and U.S. Leading Economic indicators consensus of -0.7% from -0.3% indicate a slowing of the U.S. economy  which could lead the Fed to pause interest rate increases which would be bullish for gold.
• Friday will see the release of Canadian retail sales and the forecast to show a decline of -0.6%. indicating weaker economic sentiment. This would cause the Canadian Dollar to weaken.

Geopolitics

China has imposed sanctions on a US Congress member after they visited Taiwan. The move comes amidst a recent meeting between Taiwan and the US, as China attempted to portray its leader, Xi Jinping, as a peace promoter to avoid domestic unrest. In other news, North Korea has reportedly tested a new Intercontinental Ballistic Missile (ICBM), increasing tensions in the region. Meanwhile, the United States has deployed a guided-missile submarine as a precautionary measure amidst rising tensions with Iran.   

Energy Aspects warned of potential oil supply shortages due to China’s surging economy, while Canada is predicted to achieve record oil production in 2023. Crude oil prices reached an 11-week peak of $81 per barrel, and OPEC and Russia announced production cuts, risking a supply shock of 2 million barrels per day in the oil market.

World Bank President David Malpass emphasized policy changes to boost growth and production at the IMF Spring Meetings. Notable progress was observed in debt transparency, development finance, climate action, and the World Bank Group’s vision and mission. The Development Committee highlighted sustainability, resilience, and inclusiveness, and proposals to bolster the World Bank Group’s operational model and financial capacity were welcomed. Debt sustainability, debt restructuring, and a long-term financing strategy for Ukraine were discussed, with the involvement of various international officials.

Federal Reserve Governor Christopher Waller expressed his support for further monetary policy tightening to bring down persistently high inflation. He believes that the labor market is strong and tight, and financial conditions have not significantly tightened, so monetary policy needs to be tightened further. However, he is willing to adjust his stance if needed if credit tightens more than expected. Waller is not comforted by the recent consumer price report showing inflation dropping to 5%, as he is focused on core inflation, excluding food and energy, which has shown little progress. Waller’s comments come amid increasing signs of differences of opinion by policymakers, and as the central bank’s staff forecast a mild recession in March. Atlanta Fed President Raphael Bostic favors one more rate increase to ensure that inflation is on a path to the Fed’s 2% goal, followed by a pause. Chicago Fed President Austan Goolsbee said central bank officials shouldn’t be too aggressive with further rate hikes in the wake of recent stress in the banking sector, though he wants to see more data before deciding what action he would support at the Fed’s next meeting.

In European politics, recent events have highlighted the importance of supply chain logistics and energy security. Hungary and Poland have banned grain imports from Ukraine, to protect their agricultural markets, as the ongoing conflict and blockade of Black Sea ports is causing disruption to supply chains, driving prices down in those countries. Meanwhile, Finland has switched on a nuclear reactor, increasing their energy security and reducing reliance on Russian gas. Other European countries are planning for more nuclear power, while Germany is shutting down its own nuclear plants.

Spot gold prices have surged, peaking over $2,000 per ounce due to the ongoing banking crisis and economic uncertainty. However, the upward trend seems to be decelerating. Gold fell below the $2,000 mark after reaching two technical extremes, which traders often interpret as a sign of an impending price reversal.

PS … SpaceX might launch the STARSHIP today, if it is successful this could be a significant advancement in space travel…

The Call

Last week Gold and Silver both managed to make new yearly highs, then promptly saw profit taking. 

Trend has been higher since the beginning of March. We see no reason for that to change.

Sideways this week. Looking for a catalyst to test $2065 (Futures). In the spot market we are anchored around the $2000 level. 

Range this week is inside last week. $1995 to $2020.

Silver has been on an even better run since March. Tracking the moves in gold, but wider ranges. Look for a test of $26.50 (Futures) this week.

Last Week in Review

Precious metals made some significant gains during the week until Friday’s Retail Sales data which was softer than anticipated. Gold made new weekly high of 2049 before pulling back to finish unchanged for the week and silver climbed $0.57 to settle at 25.50. Gold finished lower on Friday, leading prices to an overall loss  after posting their second-highest settlement on record. A slew of mixed economic data including retail sales, industrial production and consumer sentiment cemented expectations (80%) that the Federal Reserve will hike rates another 25 basis points at next month’s meeting.