Guardian Weekly Market Report 80

Issue 80 – The week of August 28th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

This week we will get several key updates on inflation, jobs, and home prices in the U.S… The JOLTS report for July will come out Tuesday, followed by ADP National Employment Report on Wednesday, and the Labor Department’s nonfarm payrolls report on Friday.

• Monday will be a quiet day with no economic releases scheduled.
• Tuesday brings us the S&P Case-Shiller home price index at 9:00 AM, followed by the Job Openings and Labor Turnover Survey (JOLTS) for July at 10:00 AM. August Consumer Confidence will also be released at 10:00 AM. 
• Wednesday see’s the release of the ADP National Employment Report for August, U.S. GDP – second estimate (Q2 2023), Consumer Spending, and Advanced retail and wholesale inventories at 8:30 AM. Pending Home Sales for July will then come out at 10:00 AM.
• Thursday we will get the Weekly Initial Jobless Claims in the U.S. at 8:30 AM along with the Feds favorite economic indicator the Personal Consumption Expenditures ( PCE). 
• Friday will see the U.S. Nonfarm Payrolls for August with a lower jobs estimate of 165,000 vs last months 187,000, the U.S. unemployment rate at 8:30AM followed by ISM manufacturing and Construction spending at 10:00 AM.

Geopolitics

 In a surprising move during the final day of the BRICS summit, the existing member nations – Brazil, Russia, India, China, and South Africa – announced the admission of six new members, effectively doubling the bloc’s size. Starting from January 1, 2024, Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates (UAE) will join the BRICS group. The expansion aims to build a more equitable, inclusive, and prosperous global world. South African President Cyril Ramaphosa emphasized that this expansion marks a new chapter for the BRICS alliance, with the possibility of more phases to come, as over 40 nations have shown interest in joining and 22 have formally applied. This historic decision was welcomed by leaders of both existing and new member countries, highlighting unity, cooperation, and a shift away from traditional globalization.

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping have agreed to intensify efforts to de-escalate tensions at the disputed border between their countries. The two leaders met on the sidelines of the BRICS summit in Johannesburg, where they discussed their ongoing border issues. The disputed boundary has led to a three-year standoff between Indian and Chinese soldiers in the Ladakh area, and a clash in the region three years ago resulted in casualties on both sides. Modi and Xi’s agreement to intensify efforts comes as both countries seek to stabilize the situation and avoid further conflict along the Line of Actual Control that separates their territories.

Japan has begun releasing treated radioactive water from the Fukushima nuclear power plant into the Pacific Ocean, a move that has prompted China to impose an immediate blanket ban on all aquatic products from Japan. Japan’s government approved the plan two years ago, and the UN nuclear watchdog recently gave it the green light. The discharge is part of the decommissioning process of the Fukushima Daiichi plant, which was destroyed by a tsunami in 2011. Tokyo Electric Power (Tepco), the plant’s operator, said the release started without any identified abnormalities. However, China opposes the plan and has called on Japan to prove the water’s safety.

Federal Reserve Chairman Jerome Powell’s highly anticipated speech at the Jackson Hole symposium in Wyoming did not have a significant impact on the market. Powell took a hawkish stance on U.S. monetary policy, indicating that the fight against inflation is not over and that the Fed is willing to continue raising interest rates to control inflationary pressures. He mentioned that the U.S. economy might not be cooling down as desired to counter inflation. While some analysts perceived Powell’s tone as somewhat hawkish, it may not have been as hawkish as some market participants expected.

The Call

U.S. economic data continues to play an essential role in the sentiment in the gold market. The Federal Reserve has said that it will maintain interest rates as healthy economic activity continues to support the tight labor market. With Nonfarm payrolls report out this Friday, a soft number and or a revision downwards could breathe some new life into the precious metals. We believe the precious metals are forming a bottom and expect a strengthening of prices heading into the end of 2023. We have had a breakout to the upside on the December chart around the 1945.00 level and await confirmation with a continuation of the rally towards the 1975.00 to 2000.00 level.

Last Week in Review

Investors spent the week waiting for Federal Reserve chair Jerome Powell’s speech at Jackson Hole. Right out of the gate he said inflation is still too high, and warned that restoring price stability will likely require an extended period of elevated interest rates. Powell said it’s encouraging that inflation has cooled – from 9.1% last summer to 3.2% last month. He then stressed that some of the improvement could be temporary, and he reiterated the Fed is committed to getting inflation all the way down to their 2% target. These announcements and forecasts will be vital to long term investors moving forward .

Gold opened up Sunday evening at 1890 spot and rallied most of the week to finish at 1922.00.

Silver rallied strongly from its support this week at the 22.30 level. After opening at 22.79, silver rallied a 1.50 to finish at 24.28.

• The U.S. Dollar Index was stronger again this week and finished a little over the 104.00 mark.
• The Gold/Silver Ratio closed out the week a quite a bit stronger  at 79.1 ounces of silver for 1 ounce of gold.