Issue 68 – The week of June 5th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

• This week will be relatively quite with updates on U.S. factory orders, non- manufacturing services, the U.S. trade deficit, and consumer credit data.
• Monday has the S&P U.S. services PMI at 9:45 AM. Followed by ISM Manufacturing PMI and ISM Manufacturing Employment for May at 10:00 AM.
• Tuesday is a quiet day with no major economic indicators due out.
• Wednesday has the U.S. trade deficit from the U.S. Department of Commerce being released at 8:30 AM. An widened trade gap is expected with the median forecast of -$75.2 Bn with last months at -$64.2 BN
• Thursday we see the Weekly Initial Jobless Claims in the US at 8:30AM. This is followed by Wholesale inventories for April at 10:00 AM.
• Friday is another quite day with none scheduled.

Geopolitics

Last week, there were several reports on inflation from different countries. In Switzerland, the measure of underlying inflation slowed more than expected, dropping below the central bank’s target. Meanwhile, in Turkey, inflation decelerated to its slowest pace since 2021, thanks to President Recep Tayyip Erdogan fulfilling his pre-election promise of providing free natural gas to households last month. 

 After months of stalemate and tense negotiations, Congress successfully passed a bill on June 1, 2023, to suspend the debt limit until January 1, 2025. This move, signed into law by President Joe Biden on June 2, 2023, prevented a potential default and economic catastrophe. The bill also introduced spending caps for non-defense expenditures in fiscal years 2024 and 2025, while ensuring full funding for veterans’ health care. 

South Africa’s railway industry, a critical economic mainstay and transport lifeline, is grappling with surging crime rates. The deteriorating security situation is compelling people towards costlier alternative transport. Despite governmental acknowledgment of the issue and commitments to overhaul the railway system, progress has been glacial and pricey. Experts are voicing urgent warnings to prevent a total sector collapse. In this context, gold mining, a significant sector in South Africa, may be impacted by these issues, affecting gold supply and prices on the global market. 

Following positive Non-Farm Payroll data, the US dollar experienced a rebound in strength. This upward movement can be attributed to the optimism generated by the NFP report, as well as the indications from FOMC policymakers that interest rate cuts are not being considered. The forward guidance and positive tone from the members resulted in the USD gaining strength on Friday, reflecting confidence in the robustness of the US economy. 

The headline non-farm payroll report surpassed expectations, with 339K jobs added compared to the anticipated 180K, surpassing April’s upwardly revised figure of 294K. As a result, the probability of an interest rate hike in June remains low, as the latest US jobs report is likely to give the Federal Reserve reason to exercise caution. 

The Call

Gold and Silver made an attempt to rally this week. Both were doing very well until the release of the Non Farm Payroll numbers Friday morning at 8:30 AM. They were both sold off from near their highs of the week with Gold experiencing stronger selling than Silver. We expect Gold to retest the recent low of 1932. A break of the 1930 – 1935 support will see Gold retreat to test the 1900 area and possibly lower. We continue to call for a lower prices for Gold and Silver until Gold closes above the 2000 – 2012 price targets and Silver closes above 24.20 which would confirm a new rally to higher levels.

Silver had a rally during the week to the 24.00 level and failed to close up there sliding back to the 23.60 level. With the quiet week ahead with no major economic indicators, we see gold going lower and silver following.

Last Week in Review

• Gold opened the week at 1943 and had a trading range from a low of 1932 up to the high of 1983. The high came in on Thursday with a retest of the high Friday morning just before the NFP was released. It then sold off steadily to close the week at 1947.
• Silver opened the week at 23.32 and dipped down to the low of 22.93 Tuesday morning and then rallied steadily up to the high of 24.01 Thursday. Friday morning saw a retest of the high just before the NFP release. This hot number caused a some what softer selloff in silver than gold to end the week closing at 23.60.
• The U.S. Dollar Index continued its strong performance this week to close down slightly at 104.04 from 104.22 after posting a new 3 week high at 104.70 on Wednesday. The strong U.S. dollar continues to weigh on the price of gold this week. The dollar has been on a three week rally taking it from the 102.00 area to a little over 104.00. Upper target would be 105.47 with the low target a 102.34.
• The Gold/Silver Ratio ended the week at 82.50 ounces of silver for 1 ounce of gold which was a little stronger as silver did not sell off as much as gold on the NFP Jobs number on Friday.

• The Non Farm Payroll Jobs number was released by the Labour Department on Friday for the month of May. Payrolls rose 339,000 and was much better than expected (190,000) in a resilient labour market.
• Canada’s economy grew by more than expected in the first quarter, upping odds of a rate hike next week . The economy grew at an annualized rate of 3.1% beating the forecast of 2.5%.