Issue 63 – The week of May 1st, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

It is the first week of May and a slew of reports are coming out including the Federal Reserve interest rate decision on Wednesday followed by the Non-Farm Payroll report on Friday.

These two are not the only reports of note out this week – we are also awaiting ISM Manufacturing, Jolts Job openings, and Building Permits on both sides of the border.

Monday sees the US release the ISM PMI report. This is a survey of manufacturing expectations for economic activity and assessment moving forward. The Bank of Canada will also release their business outlook survey which is used by the bank for deciding future interest-rate policies.

Tuesday will see the US release the JOLTS report on job openings, Canada will release Canadian Building Permits and is day one of the FOMC Meeting.

Wednesday brings the precursor to Fridays NFP with the release of the ADP Payrolls data which is expected to show a slight softening. At 2:00PM the Federal Reserve interest-rate statement is announced followed by the Fed’s Chair Jerome Powell press conference at 2:30PM.

Thursday’s US Initial Jobless claims are expected to increase by 10,000. The US Trade Balance for March is also expected this week.

Friday will bring the release of the US Employment report (NFP) at 8:30AM. Consensus is a drop to 180,000 from the previous report of 236,000. The unemployment rate is expected to rise from 3.5% to 3.6%. The Canadian Employment report is due out and expected to show a slowdown in new jobs between 10,000-15,000. The unemployment rate is expected to increase to 5.1% or 5.2% from the current 5%.

Geopolitics

The world is currently facing numerous geopolitical tensions and economic uncertainty that have real potential to cause widespread instability.

At the forefront is the ongoing conflict between Ukraine and Russia, which has been raging for over a year now. The most recent violent escalation has resulted in the loss of lives and extensive damage to property, leaving the situation unpredictable. Despite global condemnation, tensions continue to rise.

Sudan has experienced significant turmoil, with violent clashes between armed forces and paramilitary units leading to a growing humanitarian crisis. The conflict also threatens the availability of an essential component used in carbonated beverages, gum arabic (acacia gum), which could have implications for the international market. The situation has prompted international stakeholders to become involved in the discord, with calls for a ceasefire.

Tensions between China and Taiwan are also escalating, with China continuing military exercises near Taiwan, and political meetings between the US and Taiwan adding to the strain. The potential for conflict and its impact on world trade is a significant concern. Neighbouring countries like the Philippines are also becoming involved, adding to the complex geopolitical tensions in the region.

On the economic front, persistently high inflation is a significant worry, with food and energy costs driving up prices globally. Tight labour markets in developed countries are also likely to sustain growth and inflation, causing concern for economists and policymakers alike. While most central banks have reached the end-game for rate increases, the potential impact on economic growth remains a significant concern.

Investors seeking safe-haven assets are also driving up the demand for gold, with rising prices leading central banks to increase their gold reserves to stabilize their economies and hedge against inflation. This trend has sparked discussions about the future of gold and its value in times of crisis. Finally, the banking sector is facing several challenges, with regulators holding an auction for the ailing regional bank, First Republic Bank, to shore up the sector. Concerns over excessive risk-taking, deposit outflows, and rising valuations are leading to a decrease in investor confidence and profitability. These issues are critical to monitor as they could have a significant impact on global financial stability.

The Call

Gold and silver spent last week consolidating with gold’s range between $1973 and $2011. With a slew of important indicators due this week, volatility will be front-and-centre and we expect to see further consolidation. We expect a pullback to the $1930-$1950 area before we start heading back towards the highs. A close above $2020 would see gold retesting some of its historical highs.

Similarly to gold, silver dipped to the range of $24.40-$25.43. Last week’s gold to silver ratio was at 80.05 and this morning we are trading in the 78.60 to 1 area. This is a bullish sign with silver leading the way. A close above $25.62 would send silver much higher towards $26.00 an ounce. 

Last Week in Review

Precious metals retreated several times this week only to rally back towards $2000 gold and $25 silver. Gold bounced back again on Friday with renewed concerns over US banking turmoil. Gold made new all-time highs with silver making new monthly highs as they finished the month of April consolidating in the $1980-$2000 range for gold and $25 for silver. The Gold/Silver Ratio ended the week at 80.05 ounces of silver for 1 ounce of gold.

	Gold	Silver
Open	1983	25.15
High	2011	25.43
Low	1973	24.53
Close	1990	25.10