Issue 67 – The week of May 29th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

• This week will be a holiday-shortened week, with U.S. markets closed for the Memorial Day holiday on Monday. We will get an update on U.S. home prices along with the labour market with Non Farm Payrolls on Friday. We’ll also get updates on inflation and unemployment from the eurozone.
• Tuesday will see the release of the Case Shiller National Home Price Index for March. Prices are expected to have risen 0.01% in March after a 0.02% rise in February. Feb’s rise marked the first rebound after seven months of decline. Consumer confidence for May is also out and is expected to decline to 99.0 from 101.3.
• Wednesday will see the Chicago Purchasing Managers Index for May along with Job Openings and Labour Turnover Survey (JOLTS) for April.
• Thursday we see the Euro Area Inflation Rate and Unemployment Rate. Also Weekly Initial Jobless Claims in the US at 8:30AM. Followed by S&P Global Manufacturing PMI and ISM Manufacturing PMI for May.
• Friday’s U.S. Non Farm Payroll is the most important indicator this week. Economists project a gain of 180,000 jobs, fewer than the 253,000 jobs added in April as the Federal Reserve’s interest rate hikes cool the labour market. Unemployment is forecast to increase slightly to 3.5%.

Geopolitics

The gold market has seen its third consecutive weekly loss, significantly impacted by the impending threat of the debt ceiling. An ‘agreement in principle’ concerning the debt ceiling has been successfully negotiated and reached, marking a crucial step forward in addressing this significant fiscal issue. Continued uncertainty associated with this fiscal limit has cast a proverbial shadow over the gold market, causing its value to decline for three weeks straight. However, it’s important to note that this downturn is perceived as a temporary setback rather than an unshakeable crisis.

The inflation rate recorded a notable increase in the month of April, thus presenting a significant challenge to the Federal Reserve, leaving consumers and commodities alike reeling from its effects. The surge in inflation has exceeded anticipations, leading to widespread economic repercussions. Among other things, gold, a traditionally stable asset, has not been exempt from this development and is enduring its share of the impact.

The situation concerning interest rates has been equally dynamic, featuring dramatic fluctuations that could test the resilience of even the most robust market participants. The prediction for interest rates presents a volatile landscape, suggesting caution and preparation for potential market turbulence.

Historical economic patterns indicate that increased credit volume tends to drive interest rates up, presenting an inverse relationship. This trend underscores the pivotal role of central banks in governing the fate of interest rates. The policies established by these institutions serve as the controlling forces that shape market behavior.

Moving to international affairs, Zimbabwe is making notable progress in the technology sector by adopting blockchain. The country’s positive response to this forward-thinking technology indicates its commitment to integrating progressive systems for a prosperous future. This development aims to establish a dependable and secure value holder, a venture that holds immense potential.

In a global financial trend, many countries are initiating a process known as de-dollarization which continues to be a newsworthy theme.  Zimbabwe’s adventurous dive into blockchain technology could signify a model for future financial systems, but the prevailing market conditions in that country currently pose significant challenges that make it difficult to validate this premise.  The current debt and political challenges in the U.S. foster a climate conducive to the development of innovative monetary solutions. These complexities necessitate new approaches potentially leading to transformative changes.

The Call

Gold and silver continue to move lower and are trying to find a bottom. If gold breaks through the 1930-1935 support, we must expect a retest of the 1830 – 1900 area before a bottom can form. We continue to call for a lower gold price until gold closes above the 2000 – 2012 price range which would confirm a new rally to challenge the highs.

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 silver’s low in the 22.50 range. If gold breaks through the 1930 -1935 support, we expect silver to also break with a target in the 21.00 – 21.50 area. A silver close above 24.10 would create a new buy, signaling the bottom is in.

Last Week in Review

• Gold opened the week at 1978 and had a trading range from a low of 1938 up to 1983. The high came in mid week on Wednesday and then drifted lower making the weekly low of 1938 Friday morning. It then traded slightly higher to close the week at 1946.
• Silver opened the week at 23.85 and was sold off steadily through out the week making the low of 22.70 on Friday morning. A rebound off the low took us back to the midpoint for the week closing at 23.31.
• The U.S. Dollar Index continued its strong performance this week to close at 104.22 from 103.20. The strong U.S. dollar continues to weigh on the price of gold this week. The dollar has been on a two week rally taking it from the 102.00 area to a little over 104.00.
• The Gold/Silver Ratio ended the week at 83.48 ounces of silver for 1 ounce of gold which was down a little for the week.

• The Bureau of Labour Statistics released the latest data on inflation, the Personal Consumption Expenditures Price Index (PCE) for April. This showed that inflation rose by 0.04% last month, an increase of 4.7% from a year ago. The latest PCE indicates that inflation remains entrenched in the U.S. economy and the raising of rates has had little to no effect in reducing consumer spending which rose 0.8%.