Issue 87 – The week of October 16th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

On Tuesday, the U.S. Census Bureau will issue data on national retail sales for September, gauging the strength of the U.S. consumer’s spending. We will also get the latest updates on the housing market, including housing starts (Sep) and existing home sales. The NAHB’s will release the housing market index for October.

• Monday, we start the week with the NY Empire State Manufacturing Index for October.
• Tuesday at 8:30 AM we get Retail Sales for September. The U.S. Census Bureau will issue its latest report on national retail sales, a proxy for consumer spending. At 9:15 AM Industrial production and Capacity Utilization are released followed by Business inventories ay 10:00 AM.
• Wednesday we will see Housing Starts and Building permits at 8:30 AM followed by the Fed Beige Book at 2:00 PM.
• Thursday, we will get the Weekly Initial Jobless Claims in the U.S. and the Philadelphia Fed manufacturing survey at 8:30 AM. 10:00 AM brings Existing Home Sales and U.S. leading economic indicators.
• Friday is a quiet day with no important economic indicators.

Geopolitics

A humanitarian crisis is unfolding in Gaza as hundreds of thousands of Palestinians flee the territory’s north to the south, following Israeli warnings of an anticipated ground invasion. Israel’s military massed personnel and equipment at the border, announcing plans for a coordinated air, sea, and land attack. This comes after Hamas carried out a major terrorist attack in Israel, resulting in a significant death toll and injuries. In Gaza, clean water, fuel, medical supplies, and electricity have become scarce, creating dire conditions. The UN has expressed concern about the situation. The forced movement of patients in Gaza is viewed as potentially life-threatening. Additionally, Americans in Gaza have faced difficulties evacuating, with border crossings closed.

U.S. Treasury Secretary Janet Yellen expressed concern about the unprecedented attacks on Israel by Hamas, stating that these attacks added risks to the already tepid global economic outlook. Yellen condemned the attacks and pledged strong support for Israel. She noted that funding for Ukraine and resources for Israel were top priorities for the Biden administration. The conflict has led to increased crude oil prices and a rise in safe-haven currencies. Yellen mentioned that the U.S. is constantly evaluating whether to impose new sanctions on Iran if evidence suggests the country’s involvement in the attack. She downplayed the potential impact of the conflict on the global economy but acknowledged that exogenous shocks like the attacks on Israel bring additional risks. Yellen expressed hope for a soft landing for the U.S. economy but acknowledged that it’s not guaranteed.

Numerous Western companies have sold or transferred their Russian assets in response to sanctions and threats of asset seizures by the Kremlin amid the Ukraine conflict. This corporate exodus from Russia has raised concerns that Russian entities may acquire valuable assets at discounted prices. Some notable examples include: automotive  manufacturers Volkswagen, Renault and Continental, Shell natural gas, as well as food and retail companies  Heineken, McDonalds, Ikea, Amrest, Xerox and Veon to name a few. These divestments reflect companies’ responses to the geopolitical situation in the region, sanctions, and the risk of asset seizures.

The Call

Our view that Gold would test the higher end of the range was conservative when gold blew through 1900.00 to close at 1933.00 on Friday. This week Guardian projects a trading range from a support level of 1900.00 to a test of a resistance level at 2000.00 on the high end. Central Banks have been steadily increasing their gold reserves over the last few years and we see this continuing through 2024. 

Last Week in Review

Gold opened Sunday evening at 1848.40 spot and then traded a little lower to 1844.90 before the buying started with a flight to quality because of the war in the Middle East. Gold was bid all week and after a little dip on Thursday started a strong rally early Friday morning going up almost 63.00 and closing Friday afternoon at 1933.30 which was virtually the high of the week.

Silver opened at 21.78 on Sunday evening and traded sideways until mid week when Silver also rallied strongly on Friday to finish the day up around ninety cents to 22.74 an ounce.

• The U.S. Dollar Index finished a little stronger around 106.43 after rallying a little from last weeks close at 106.10.
• The Gold/Silver Ratio closed a little weaker for the week at 85.0 ounces of silver for 1 ounce of gold.