Issue 66 – The week of May 22th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Reports of Note due out this week:

Reports out this week will include the Federal Reserve minutes from the last FOMC meeting where policymakers raised interest rates by 25 basis points followed by Fridays release of its Personal Consumption Expenditures (PCE) Price Index. This index is the Fed’s preferred inflation gauge.

Monday sees Fed speeches by 4 Fed Presidents, St. Louis Fed President James Bullard, San Francisco Fed President Mary Daly, Atlanta Fed President Raphael Bostic and Richmond Fed President Tom Barkin.

Tuesday will see Building Permits at 8:00AM, S&P Global Composite PMI-Flash Estimate for May being released at 9:45AM along with New Home Sales for April at 10:00AM. These economic indicators are of medium importance only.

Wednesday will see the FOMC Meeting Minutes at 2:00PM.

Thursday we see the Initial Jobless Claims in the US at 8:30AM. Also out is Pending Home Sales at 10:00AM which are expected to rebound by 1.1%. The housing market was down 5.2% in March, suggesting the U.S. housing market is still under pressure despite a plateau in mortgage rates and a small rebound in home prices in late winter.

Friday we have a slew of economic indicators out starting with the FED’s preferred inflation gage (PCE) Personal Consumption Expenditures Price Index along with Personal Income being released at 8:30AM which are HIGH in importance. Also out are the Durable Goods Orders for April and the Univ. of Michigan Consumer Sentiment Index.

Geopolitics

Global de-dollarization continues to be a trend, highlighted by the ongoing geopolitical turmoil that shows no signs of abating. The trend of global de-dollarization, with countries looking to reduce their reliance on the US dollar and increase their reliance on other currencies like China’s yuan, could push the value of gold up. Western sanctions on Russia that froze its foreign currency reserves have highlighted the risks of using dollars, leading to more countries turning towards non-dollar currencies for trade deals.

The escalating tensions between Russia and Ukraine persist as Ukraine ramps up offensive operations in Ukraine and across the border into Russia with drone strikes against support infrastructure. Russia continues its aerial offensive. The fog of war continues with back and forth advances claimed by both sides while external entities continue to supply them based on geopolitical alignments.

The previous week’s postponement of a meeting between President Joe Biden and House Speaker Kevin McCarthy aimed at averting a first-ever U.S. default was seen as a setback, causing some angst in the financial markets. This week’s follow-up, with the positive news that both are working together, caused positive market moves, only to be thwarted by the Republican Debt-Ceiling Negotiators walking out of the meeting, stating that the White House is ‘unreasonable’. In addition, the standoff in Washington, along with rising geopolitical risks, persistent anxiety over the health of the U.S. banking sector, continued concerns about an economic slowdown, and flows into gold-backed exchange-traded funds (ETFs), boosts gold’s safe-haven appeal. Global inflation versus potential US rate cuts has shifted market expectations, while the continued reporting of central banks increasing their purchases of gold to stockpile in their reserves is on everyone’s mind.

There have been several notable events and trends in the gold mining industry recently. Some of the key developments include exploration and field programs by companies like Maple Gold Mines, the formation of joint ventures for large-scale exploration programs such as that of Ma’aden and Ivanhoe Electric in Saudi Arabia, and significant acquisitions, such as Newmont Corp.’s acquisition of Newcrest and American Pacific Mining’s acquisition of Clearview Gold. Furthermore, a significant trend in the gold mining industry is the shifting of the industry’s epicenter to New York, with companies such as AngloGold Ashanti Ltd. moving their primary listing to the New York Stock Exchange.

The Call

In the Canadian market last week, we saw gold stocks pull back. The biggest loser was Barrick gold, down over 7% on the week. The iShares for the TSX Global gold Index were down 4.9% on the week. No weekly sell signals yet but lots of daily sell signals in the gold stocks. We have had 8 lower highs on golds daily chart so until this trend changes, we look for continued selling with gold testing the 1900 to 1930 level. 

Silver had a rally from the low in early March to a high on April 13th and a retest of that high on May 4th. Silver has been moving lower and if we realize a Fibonacci 0.618 retracement that puts silvers low in the 22.50 range.

The big question will be the U.S. debt ceiling problem?

Last Week in Review

Gold opened the week at 2008 and had a trading range from a low of 1951 up to 2020. The high came in at the open on Sunday night and then gold drifted lower until Thursday morning where it made the weekly low of 1951 as we expected. Gold then went sideways until Fed Chair Powell speech on Friday started a rally to close out the week at 1977.

Silver opened the week at 23.97 and was sold off lightly to a low of 23.35 midweek. We then had a small rally back over 24.00 and closed Friday at 23.89.

The U.S. Dollar Index continued its strong performance this week to close at 103.20 from 102.68. The strong U.S. dollar equated this week to a lower gold price as expected.

The Gold/Silver Ratio ended the week at 82.78 ounces of silver for 1 ounce of gold which was close to unchanged.

	Gold	Silver
Open	2008	23.97
High	2020	24.27
Low	1951	23.35
Close	1977	23.89