Guardian Weekly Market Report 77

Issue 77 – The week of August 7th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

The Labour Department will release it’s latest inflation readings, with the Consumer Price Index (CPI) on Thursday and the Producer Price Index (PPI)on Friday.

• Monday will be a quiet day with the release of Consumer credit at 3:00 PM.
• Tuesday we will get the release of the U.S. trade balance at 8:30 and U.S. wholesale inventories at 10:00 PM. 
• Wednesday, we have no reports scheduled.
• Thursday we will get the Weekly Initial Jobless Claims in the U.S. at 8:30 AM along with the Consumer Price Index (CPI). Consumer prices likely rose 0.2% last month, matching June’s rate, and likely up 3.3% on an annual basis.
• Friday brings the Producer Price Index (PPI) at 8:30 AM and Consumer Sentiment (prelim) at 10:00 AM. Producer prices are projected to have risen 0.2% last month, after rising 0.1% in June.

Geopolitics

 Market analysts speculate that a gold-backed currency announcement might be made at the upcoming BRICS summit in Johannesburg later this month, despite denials from the host country. The proposed new international currency unit, potentially backed by gold reserves of BRICS and other “friendly” nations, is seen as a move to challenge the US dollar’s dominance in international finance. However, experts believe the impact would be more political than economic, and the US dollar’s foundation remains strong. While the BRICS economies may have substantial gold reserves, the dominance of the US dollar is deeply entrenched. Analysts emphasize that any challenge to the US dollar’s position would require significant disruptions to its twin pillars – the stability of the US Treasury market and the backing of the US military.

The recent coup in Niger has drawn significant attention and reactions from foreign powers. The United States and France threatened to sever ties and suspend military cooperation with Niger, endangering millions in aid. Niger’s neighbors, Mali and Burkina Faso, declared that any foreign action against Niger would be considered a “declaration of war” against them as well. The Economic Community of West African States (ECOWAS) issued an ultimatum to the junta to restore the deposed president within one week or face potential military action. The coup’s consequences have sparked turmoil and divisions in West Africa, with concerns that the crisis could escalate into a regional war. Niger’s strategic significance lies in it being the last domino in a chain of African countries ruled by military juntas. If the coup succeeds, it could further destabilize the region, creating opportunities for extremist groups and foreign interests.

South Korean experts are forming a committee to verify claims of a room temperature superconductor discovery, which has caused excitement among investors and skepticism among peers. Superconductors, which allow electricity to pass through without energy loss, are highly valuable, but current discoveries have only worked at extremely cold temperatures or high pressures. Despite skepticism, shares in U.S, Chinese, and South Korean companies surged after the claim, and a Chinese university’s video replicating the experiment added to the frenzy. A room temperature superconductor is a material that can conduct electricity with zero resistance without needing special cooling. Such a room temperature superconductor could be transformative for science and technology but previous claims of creating one have proven controversial. If the material is further verified it would revolutionize the electrical grid and many other potential applications in electronics and technology.  

The Call

On Friday, the University of Michigan will release the preliminary August reading of its Consumer Sentiment Index, providing an update on consumer confidence. The index reading is projected at 71, down slightly from 71.6 last month. July’s reading was the highest in 2 years, as consumers became more optimistic on the economy and their finances amid slowing inflation and a strong jobs market. While consumer sentiment is still well below pre-pandemic levels, it’s a stark reversal from last year, when the index hit an all-time low of 50 amid the highest inflation in 4 decades. So with CPI and PPI expected marginally higher  and consumer confidence reasonably stable, Gold and Silver are most likely range bound trading between 1950 and 2050 on the December contract. We are near the bottom of this range and would expect a rebound towards 2000-2025 this week.  A breakout and close above 2022.00 on the December contract should indicate the start of a rally towards the highs… A close below 1973.00 and the downside will continue. Silver breakout number is 24.76 and break down number is 23.43.

Last Week in Review

Fitch Downgraded the U.S. Dollar credit rating late Tuesday providing the latest blow to the dollar’s global dominance, international standing and reputation. On Thursday we saw The Bank OF England raise interest rates a quarter of a percentage point as expected, This was followed earlier by interest rate increases by the Federal Reserve and the European Central Bank the week before. 

Gold opened the week at 1962 on Sunday evening and with choppy trading worked its way to a high of 1975 on Monday afternoon before the selling started. Gold worked its way lower the rest of the week with the low coming on the Nonfarm Payroll number on Friday morning. A rally then took the price back into the 40’s where we closed around 1942.

Silver as usual followed gold’s pattern closing the week at 23.63.

• The U.S. Dollar Index rallied all week until Friday’s NFP and finished around the 102.00 mark.
• The Gold/Silver Ratio closed out the week a little weaker again  at 82.2 ounces of silver for 1 ounce of gold.