Guardian Weekly Market Report 78

Issue 78 – The week of August 14th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

On Tuesday, the Census Bureau will issue data on nationwide retail sales for July, indicating whether consumer spending held up last month. The Federal Reserve will release minutes from the latest FOMC meeting on Wednesday, which could offer clues as to the trajectory of monetary policy..

• Monday will be a quiet day with no economic releases scheduled.
• Tuesday’s biggie will be the release of U.S. Retail Sales for July at 8:30 AM and the Empire State manufacturing survey. At 10:00 AM we see the release of June Business Inventories. 
• Wednesday starts off with Housing starts and Building permits at 8:30 AM. Then Industrial production and Capacity Utilization will be out at 9:15 AM. The FOMC minutes of the July meeting will be released at 2:00 PM.
• Thursday we will get the Weekly Initial Jobless Claims in the U.S. at 8:30 AM along with the Philadelphia Fed manufacturing survey. U.S. Leading economic indicators for July will be out at 10:00 AM.
• Friday, we have no economic indicators scheduled.

Geopolitics

The political situation in Niger has seen a significant development following the military coup that ousted President Mohamed Bazoum. General Abdourahamane Tchiani, the coup’s leader, has agreed to hold direct talks with the Economic Community of West African States (ECOWAS), signaling a potential shift toward a peaceful resolution. This agreement came after a meeting with a group of Nigerian Islamic scholars, and the talks could be scheduled in the coming days.

ECOWAS has been exploring options to restore civilian rule, including potential military intervention and sanctions. However, the recent willingness for dialogue by the coup leaders indicates a move toward negotiation. During the talks, General Tchiani emphasized the historic ties between Niger and Nigeria and claimed the coup was well-intended to stave off an imminent threat.

Despite being held in difficult conditions, Bazoum is reported to be in good spirits. The junta has gathered evidence to prosecute Bazoum and his accomplices, although no further details were provided. Concerns are growing about the health of Bazoum, his wife, and his son, who are also being held captive.

The willingness of Niger’s coup leader to engage in talks with ECOWAS represents a hopeful step towards a peaceful resolution. The situation has regional and international implications, and the concerted efforts by regional leaders, along with international support, may lead to a negotiated settlement that restores stability in Niger.

Growing similarities between the Nasdaq 100 index and gold’s XAU/USD price charts are drawing attention, suggesting that the Nasdaq could be in for some consolidation or minor retreat, a pattern that mirrors trends in gold. Since the beginning of the year, the Nasdaq 100 index has risen nearly 50%, but as it approaches its 2021 record high, momentum on higher timeframe charts has been weak. This situation closely resembles developments in gold’s monthly charts, with the yellow metal threatening to break below crucial support on the 200-day moving average. Real yields appear to be a common thread between the two markets, with a surge in real yields pressuring gold and potentially affecting the Nasdaq. Equities have thrived in an environment of near-zero interest rates and negative real rates, but the rising cost of capital and positive real rates may now pose challenges, a situation that has also led to gold’s underperformance in recent months. The Nasdaq 100 index’s rally seems to be losing steam, with cracks possibly developing, similar to the development on gold’s daily charts that pushed XAU/USD toward its 89-day moving average. While this doesn’t mean the Nasdaq 100 index has turned imminently bearish, the risk-reward for those expecting continued gains doesn’t appear as attractive as it was a few months ago, reflecting the patterns observed in gold.

The Call

This week we have some major economic indicators being released. Tuesday, we have Retail Sales and Wednesday it is Housing Starts and Building Permits. The July FOMC meeting minutes also get released Wednesday afternoon. These indicators will move the market and with Gold and Silver at major support levels of 1900.00 and 22.25, we can cross our fingers and hope that support is found. A break of these levels and the next major support areas are 1850.00 for Gold and 21.50 on Silver. This is where the market seems to be headed. On the flipside, gold would need a close above 1981.00 on the December contract and silver above 23.85 on the September contract for the metals to reverse this downtrend.

Last Week in Review

Ecuador is reeling from the murder of presidential candidate Fernando Villavicencio, a former lawmaker and crusading anti-corruption journalist. He was honored on Friday at a funeral mass and public memorial in Quito, after the attorney general’s office charged six suspects in his death.     Maui wildfires leave trail of death and destruction. Catastrophic wildfires have scorched Maui, killing 93 with many more missing and destroying most of the historic town of Lahaina.                                                      Gold opened the week at 1944.30 on Sunday evening, made a quick high of 1948.30 and was sold steadily all week making the low on Friday of 1909.60. Not even the Hotter than expected CPI and PPI could help gold muster a sustained rally. Gold closed the week lower at 1912.70.

Silver opened at 23.66 and made a similar high like gold of 23.71 before selling off for the rest of Monday and Tuesday making a low of 22.66 in the morning. We then spent the rest of the week consolidating and closing the week at 22.68.

• The U.S. Dollar Index was stronger all week and finished around the 102.85 mark.
• The Gold/Silver Ratio closed out the week a little weaker again  at 84.4 ounces of silver for 1 ounce of gold.