Issue 83 – The week of September 18th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Coming up this week we have the Federal Reserve and Bank of England policy meetings. Monetary policy will be in the spotlight next week, as Federal Reserve policymakers gather for the latest FOMC meeting. An interest rate decision will be released Wednesday at 2:00 PM. The Bank of England will release its decision on Thursday. Also being released is the latest update on the housing market.

• Monday, we see the NAHB Housing Market Index for September.
• Tuesday brings us Housing Starts and Building Permits at 8:30 AM.. 
• Wednesday we will get the FOMC meeting interest rate decision at 2:00 PM and press conference featuring Fed Chair Jerome Powell at 2:30.
• Thursday, we start off with the Bank of England (BOE) decision on interest rates. They’re expected to hike rates 25 basis points to 5.5%-the highest since 2008. At 8:30 we will get the Weekly Initial Jobless Claims in the U.S., Philadelphia Fed manufacturing survey and U.S. current account deficit. U.S. leading economic indicators and existing homes are released at 10:00 AM.
• Friday see’s the S&P flash U.S. services PMI and U.S. flash U.S. manufacturing PMI at 9:45 AM.

Geopolitics

China sent 103 warplanes toward Taiwan in a 24-hour period, marking a record in recent times, according to Taiwan’s defense ministry. These actions come amid increasing tensions between China and Taiwan, with China conducting large military drills in the air and waters near the island. The United States, which opposes any attempt to change Taiwan’s status by force, is a major arms supplier to Taiwan. China views Taiwan as part of its territory, while Taiwan considers itself a sovereign state. These military actions raise concerns of further escalation in the region. Experts suggest that China’s recent moves may be an attempt to influence Taiwan’s upcoming presidential election in January.

Canada is set to remove the federal 5% sales tax on the construction of new rental apartment buildings in a move aimed at increasing housing supplies. Prime Minister Justin Trudeau is expected to make this announcement in response to the ongoing housing crisis. The government is under pressure to address the lack of affordable housing, and this step is part of their efforts to alleviate the issue. It comes after Trudeau’s government called on cities to take more action in solving the problem and offered federal funding to those that cooperate. The housing crisis has become a significant political issue in Canada, with the opposition Conservatives criticizing Trudeau’s handling of the matter.

China’s property sector woes persist as new home prices, property investment, and sales deteriorated in August. New home prices fell at the sharpest rate in 10 months, down 0.3% month-on-month and 0.1% year-on-year. Property investment marked an 18th consecutive monthly drop, declining by 19.1% year-on-year, while home sales declined for the 26th month in a row. Despite recent government measures to boost the property market, concerns remain that these might provide only temporary relief and could negatively affect smaller cities. Moody’s downgraded China’s property sector outlook to negative, citing economic growth challenges and the risk of default among private developers. Analysts suggest more aggressive easing measures and structural reforms may be needed for a sustainable recovery.

Unprecedented flooding in northeastern Libya has led to a death toll of at least 11,300 people, with another 10,100 missing in the city of Derna, according to the United Nations. The flooding occurred when two dams burst due to torrential rain and poor dam management. The city, already grappling with political turmoil, was devastated, with entire neighborhoods swept away. The floods have raised concerns about disease outbreaks, with reports of children poisoned from drinking polluted water. Health experts say proper burials and sanitation are essential to prevent further health risks. The disaster has prompted investigations into the dams’ collapse and calls for better maintenance and precautions.

The Call

All eyes will be on the Federal reserve this week as they hold there sixth meeting of 2023. Expectations by economists and the financial community are anticipating that the Federal Reserve will hold rates steady. However, there is still a 50/50 chance the FED raises rates 1 more time this year before interest rates start to decline in late 2024. Last weeks inflation indicators were slightly higher(hotter) than most expected and puts pressure on gold to retreat. The gold market has been stuck in a trading range between 1900.00 and 1980.00. While there is a possibility that gold breaks 1900.00 and tests the 1800.00 to 1850.00 area, we still believe that gold will rally into the end of the year and beyond.

Last Week in Review

The price of Gold opened Sunday evening at 1921.50 spot and then traded higher to 1932.80 to hit the high for the week. The price then slid into Thursday and made the low of 1900.00 before recovering somewhat. A Friday rally took gold back close to Sunday nights high before retreating a little to close at 1924.40 which was higher for the week by 6.00.

Silver opened at 22.95 and followed golds pattern to a high of 23.33 on Sunday evening and then the selling started and did not subside until the low Thursday morning at 22.30. Silver then rallied Friday to a weekly high of 23.33 before settling at 23.0

• The U.S. Dollar Index was weaker this week and finished at 104.38.
• The Gold/Silver Ratio was close to unchanged and closed out the week at 83.5 ounces of silver for 1 ounce of gold.