Issue 62 – The week of April 24th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

This week brings the latest updates on first quarter GDP figures ,Personal Consumption Expenditures(PCE) and housing market updates. Note that Federal Reserve officials will go silent on Saturday, April 22 with their blackout period lasting until after the FOMC meeting has concluded in May.

Monday: a quiet day as no major reports are due.

Tuesday: the release of New Home Sales and Consumer Confidence south of the border.

Wednesday: March Durable Goods orders which were down 1% in March. A rebound in orders could see more selling in the gold market.

Thursday’s U.S. GDP report at 8:30AM is a key indicator which will move markets and gold and silver prices. Consensus is for a lower increase of 1.8% which should be bullish for metal prices. Also out at 8:30AM is the Initial Jobless claims which are expected to increase slightly.

Friday: The release of Canadian GDP figures. This would ultimately weigh on the Bank of Canada rate policy. In the U.S., The PCE index will be released at 8:30AM and is the Fed’s preferred inflation gauge. The index is expected to be up 0.3% which is the same as last month, matching February’s. Any deviation from this number and there could be substantial movement either way in metals.

Geopolitics

Taiwanese authorities express concern over the US’s effort to reduce dependence on Taiwanese microchips, crucial for various technologies. Investors, including Berkshire Hathaway, have decreased their TSMC holdings due to increasing tensions between China and Taiwan.

Elbridge Colby, former Pentagon official, suggests the US should prioritize deterring China over supporting Ukraine, as China poses a greater threat. He recommends enhancing military capabilities and deterrence to create uncertainty for China while easing political rhetoric around Taiwan.

US Treasury Secretary Janet Yellen warns that using financial sanctions related to the dollar’s role could endanger its global dominance. Yellen acknowledges that although the US uses the dollar cautiously, sanctions could prompt countries like Russia, China, and Iran to seek alternatives.

India and China are purchasing most of Russian oil in April at prices exceeding the $60 Western price cap. Refinitiv Eikon data shows that the majority of Russian Urals oil cargoes, loaded in early April, are destined for Indian and Chinese ports, with India taking over 70% and China around 20%. Oil prices dropped to their lowest since late March due to recession fears and increased US petrol inventories. 

Ukraine’s desire to join NATO is well-known, with recent appeals from President Zelensky during a meeting with NATO Secretary General Stoltenberg. Although the NATO chief acknowledges Ukraine’s rightful place in the alliance, Kyiv’s accession is unlikely to occur soon. Putin’s opposition to Ukraine’s NATO aspirations, combined with leaked information on 97 NATO special forces combating Russian forces, indicate a resolution is not imminent.

UK consumer price inflation rate dropped to 10.1% YoY in March 2023, slightly lower than February’s 10.4% but still surpassing market expectations of 9.8%. The Bank of England is likely to raise interest rates again, as the UK maintains the highest consumer price inflation rate in Western Europe.

The simultaneous decline of the US dollar and stocks reveals underlying economic problems. Factors contributing to this trend include recent jobless claims and unimpressive earnings reports. Although companies achieved higher sales, high inflation, and dwindling consumer sentiment negatively impacted profit margins. While the Fed is currently focused on combating inflation, increasing unemployment might necessitate a shift toward cutting interest rates, potentially making Non-Farm Payrolls (NFP) a major market influencer once again.

Gold prices experienced a significant drop on Friday, heading for their worst week in eight. Hawkish statements from US Federal Reserve officials throughout the week supported bets on additional interest rate hikes and strengthened the dollar. The dollar’s gains, in turn, increased the cost of gold for international buyers.

The Call

Gold and silver have been very bullish lately. Last week they stumbled and the charts are looking like they have topped for now. We would expect gold to have a small selloff to around the $1930-$1950 level in gold this week and then a retest of the highs. Silver seems a little more bullish and a small pullback is also in the cards.

We would expect this could be an opportunity to buy the dip!

The US Dollars is strengthening and would look for this to continue this week.

Last Week in Review

Precious metals retreated from their highs with gold dipping below 2000.00 to 1982.00. This has damaged near-term bullishness with silver also dropping to 25.15. Better than expected U.S. economic data, a stronger U.S. Dollar and higher interest rates ahead are proving to be a strong headwind for gold and silver. The Canadian Dollar underperformed against the U.S. Dollar with the blame resting on a lower crude oil price.

	Gold	Silver
Open	2003	25.44
High	2017	25.70
Low	1969	24.70
Close	1982	25.15