Issue 65 – The week of May 15th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Reports of Note due out this week:

The key this week will be the U.S. Census Bureau reporting on April Retail Sales on Tuesday providing a key update on consumer spending. We can also expect GDP readings from the Eurozone and Japan and an inflation reading from Canada.

The Group of Seven (G7) summit will be held in Hiroshima, Japan starting on Friday.

Monday sees the NY Empire State Manufacturing Index(May)..

Tuesday will be a busy day with the U.S. Retail Sales for April being released at 8:30AM which are expected to show an increase from March. Also Industrial Production, Capacity Utilization, Business inventories and the NAHB Housing Market Index (May). In Canada we will get the Canadian Inflation Rate for April.

Wednesday will see the Housing Starts and Building Permits released for  April .

Thursday we see the Initial Jobless Claims in the US at 8:30AM. Also out is the Philadelphia Fed Manufacturing Index for May and Existing Home Sales for April. Housing starts are projected to have fallen slightly to 1.4 million units from 1.42 million in March indicating aq continued slowing of the US Economy. .

Friday we have the beginning of the 2023 G7 Summit in Hiroshima, Japan.

Geopolitics

The price of gold has been benefiting from the current state of the US economy, characterized by weaker inflation and a subdued US dollar. Geopolitical tensions, including deteriorating relations between the US and China and fears of a possible US default, are fueling investor anxiety. While rising interest rates typically make non-yielding bullion less attractive, weaker than expected inflation data could trigger a rush into commodities like gold.

As investors awaited the release of US inflation data, gold prices remained within a narrow range, with any clues about the Federal Reserve’s policy path keenly anticipated. However, if the Federal Reserve were to pause its inflation expectations, this could bolster gold prices further.

Growing concerns over the US debt-ceiling crisis have sparked fears of potential turmoil in financial markets should the US default on its debt for the first time. The US debt ceiling issue is becoming increasingly urgent. Hopes of a deal to avert a default dimmed after a meeting aimed at resolving the impasse, between President Joe Biden and House Speaker Kevin McCarthy, was postponed.

China has continued to increase its gold reserves for the sixth consecutive month. This steady growth in gold reserves can be attributed to its deteriorating relations with the US. China’s accumulation of gold reserves is part of a wider trend among global central banks to bolster their gold reserves. This highlights the overall robustness of China’s reserves and their potential influence on global markets. The process of de-dollarization, by reducing reliance on the U.S. dollar in global trade, is seen as a “slow-moving secular support for gold”.

The upsurge in gold prices has instigated a increase in illegal mining activities, especially in the Amazon region, but also legitimate regions such as Canada’s British Columbia exploration sector, which reached a ten-year expenditure high, in 2022, surpassing the last top in 2012. Each fluctuation in the price of gold spurs a new influx of prospectors, particularly in remote regions where regulation is challenging, but the high expenditure level reflects the sector’s robust health and potential for future growth. This rush is driven not only by individual prospectors but also by central banks, especially those in the developing world, including Brazil, which are among the top gold buyers. This is a theme that could continue as geopolitical and economic uncertainty continues to drive the price of gold.

The Call

The expected roller coaster last week came true with prices higher early in the week followed by a selloff in gold and silver. Silver’s move lower was more extreme (Stairs up and Elevator down!) than golds resulting in the silver /gold  ratio widening out to 84-1. Retail sales Tuesday will move the market with a stronger reading expected which could bolster metals prices.

The US Dollar strengthening should continue and this will not help the precious metal sector move higher. Still looking for a pullback to the 1930 to 1950 area which could come with all the economic news coming out this week. If the market moves lower , prices will need to consolidate before continuing there march higher..

Last Week in Review

Gold opened the week at 2016 and had a trading range from a low of 2000 up to 2050. The high came in after the CPI number on Wednesday morning and then started trending lower through to Friday. Traders took profits after the CPI & PPI were better than expected with a mild easing in inflation.

Silver got crushed for the week closing lower at 23.96 which was down 1.66 an ounce. Recession worries with slowing economies were to blame this time.

The U.S. Dollar Index had a strong performance this week to close at 102.68 from 101.21. A strong U.S. dollar usually equals lower gold prices.

The Gold/Silver Ratio ended last week at 78.67 ounces of silver for 1 ounce of gold and this week exploded wider to 83.98 ounces of silver for 1 ounce of gold. A huge move in one week!

	Gold	Silver
Open	2016	25.62
High	2050	26.01
Low	2000	23.74
Close	2010	23.96