Guardian Weekly Market Report 79

Issue 79 – The week of August 21st, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

On Tuesday through Thursday, the fifteenth Brics Summit will take place in South Africa. There has been talk of a gold backed currency but this will not happen at this summit.. Starting Thursday, central bankers, finance ministers and economists from around the world will gather for the annual Jackson Hole Economic Symposium hosted by the Kansas City Fed. We will also get updates on new home sales for July and the University of Michigan report on consumer sentiment.

• Monday will be a quiet day with no economic releases scheduled.
• Tuesday brings us Existing Home Sales at 10.00 AM. 
• Wednesday see’s the release of the S&P flash U.S. services PMI and S&P flash U.S. manufacturing PMI at 9:45 AM. New homes sales are out at 10:00 AM and are projected to have fallen slightly to 4.15 million units..
• Thursday we will get the Weekly Initial Jobless Claims in the U.S. at 8:30 AM along with Durable goods orders. 
• Friday will see the University of Michigan consumer sentiment final at 10:00 AM. Fed chair Powell gives opening speech at Jackson Hole summit at 10:05 AM.

Geopolitics

 Despite already purchasing 126 tonnes of gold in 2023, China is expected to continue increasing its official gold reserves, according to BMO Capital Markets analysts. The People’s Bank of China (PBoC) currently holds the seventh-largest gold reserves globally at 2,113.50 tonnes, around 3.8% of total reserves. Analysts speculate that the PBoC aims to raise its gold holdings to at least 5% of total reserves, requiring an additional 638 tonnes of purchases. Given heightened geopolitical uncertainties, this target might be outdated, and a new potential target could be the nation’s M2 money supply, which would result in significantly higher gold holdings. However, determining China’s true gold holdings remains challenging due to undisclosed private and above-ground reserves. Despite this, analysts anticipate that the PBoC will remain a long-term gold buyer.

Russia’s central bank has raised its key interest rate by 350 basis points to 12% in an emergency move aimed at halting the rapid decline of the rouble. The rate hike follows the rouble’s fall beyond 100 against the dollar due to the impact of Western sanctions and increased military spending. The central bank’s move comes after public criticism from the Kremlin about its monetary policy. Analysts suggest the rate increase may not have a long-lasting impact on the rouble’s decline, as the core issues of sanctions and military conflict remain unresolved. Russia is experiencing rising inflation due to a widening budget deficit and labor shortages.

Former President Donald Trump has confirmed that he will not participate in Republican presidential debates with other contenders in the race for the White House. Trump, who is the frontrunner in recent polls for the Republican nomination, stated that he is leading the field by “legendary” numbers and highlighted his successful presidency with achievements like energy independence, strong borders, and tax cuts. He emphasized that he will not be participating in the debates due to his strong position and the perception that the debates’ moderators and venues might be hostile toward him. Trump faces multiple criminal charges, but the logistics and politics of imprisoning a former president make a conventional prison sentence unlikely.

Around 30,000 households have been ordered to evacuate due to nearly 400 wildfires in Canada’s British Columbia province. Massive fires have merged, destroying buildings in the Shuswap region. Travel restrictions have been imposed on the city of Kelowna to ensure accommodation for evacuees. The city of Yellowknife in Canada’s Northwest Territories is also threatened by a significant fire. About 19,000 of the city’s 20,000 residents have evacuated. The province’s emergency management minister emphasized the importance of following evacuation orders, noting they are crucial for both residents and first responders. Canada is experiencing its worst wildfire season, with climate change contributing to hot, dry conditions that fuel the fires.

Russia’s Luna-25 spacecraft, an unmanned lunar mission aiming to be the first to land on the Moon’s south pole, has crashed after losing control. This mission was Russia’s first lunar endeavor in nearly 50 years. The craft was designed to explore a region thought to contain frozen water and valuable elements. The crash is a setback for Russia’s space agency, Roscosmos, which has been facing challenges due to a decline in state funding, with more focus on military projects. India’s Chandrayaan-3 spacecraft is scheduled to land on the Moon’s south pole soon, aiming to explore the area for data and images.

The Call

This week we have the BRICS Summit running from Aug 22-24 in South Africa along with Jackson Hole Economic Symposium three-day event from Aug 24-26th. Both events along with a bullish Commitment of Traders report on gold and Fed Chair Powells Friday speech could finally provide us with some positive news to help gold bounce in the short term but the trend is still down.  Lately, the retail investor has been shying away from investing in gold and silver due to the attractive no risk 5% plus money market rates available to them. How long will the downtrend continue, nobody knows. Investors should look for a sharp sell off followed by a strong bounce to indicate the bottom is in. Otherwise, it should be business as usual with gold and silver drifting lower!

Last Week in Review

The weather provided the biggest stories last week with the Maui fire and the Canadian fires in the Northwest Territories and British Columbia. The Maui fire official death toll is 114 and more than 1,000 people remain missing. Yellowknife, the capital of the NWT has been evacuated and is safe for the time being. The fires in BC’s town of West Kelona have faired much worse loosing many homes over the weekend. On the horizon we have Hurricane Hilary which is approaching Mexico and Southern California. Extreme weather seems to be a common occurrence now!

Gold opened the week at 1915.50 on Sunday evening, made a quick high again this week of 1918.00 and was sold steadily all week making the low on Thursday of 1884.00. Gold, which has made a lower high for the past 10 days closed the week lower at 1888.20.

Silver found support this week at the 22.30 level. After opening at 22.72 silver dipped into Tuesday making a low of 22.25. A small rally lasted the rest of the week resulting in a close of 22.77 after testing 23.00.

• The U.S. Dollar Index was stronger all week and finished around the 103.50 mark.
• The Gold/Silver Ratio closed out the week a little stronger  at 83.0 ounces of silver for 1 ounce of gold.