Guardian Weekly Market Report

Issue 88 – The week of October 23rd, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

We’ll get the U.S. Services and Manufacturing PMI’S  on Tuesday followed by the advance estimate for the third-quarter gross domestic product (GDP) on Thursday, along with the Personal Consumption Expenditures (PCE) Price Index- the Federal Reserve’s preferred inflation gauge- on Friday.

• Monday there are none scheduled.
• Tuesday at 9:00 AM we get the S&P Case-Shiller home price index. followed by the S&P flash U.S. Services PMI and S&P flash U.S. Manufacturing PMI at 9:45 AM.
• Wednesday we will see New Home Sales for September at 10:00 AM.
• Thursday morning will be busy as we will get the Weekly Initial Jobless Claims in the U.S., the BEA will issue the advance estimate for third-quarter U.S. GDP, Durable Goods orders and Advanced retail and wholesale inventories at 8:30 AM. Pending home sales will be released at 10:00 AM. 
• On Friday, the Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index for September. PCE prices are expected to have risen 0.35% last month, according to estimates from the Clevland Federal Reserve Bank. The core PCE Price Index, which Fed officials consider the most accurate indicator of consumer prices, was likely up 3.7% from a year ago and inching closer the the cenral bank’s 2% target. Then at 10:00 AM we will see the release of the Michigan Consumer Sentiment Index-Final Reading (October).

Geopolitics

Entering the 14th day of the Israel-Hamas war, health authorities in Gaza have reported that the death toll in the region has exceeded 5,000, with over 2,000 children among the casualties. Additionally, more than 15,000 people have been injured. Gaza’s healthcare system is said to be on the verge of collapse due to the ongoing conflict between Hamas and Israel.  In the midst of this crisis, there have been calls for a ceasefire to allow humanitarian aid to reach the Gaza Strip. The conflict began over two weeks ago, and while Israel seeks to dismantle Hamas’s military capabilities, efforts to minimize exposure of its troops and ground damage continue.

The Biden administration is reportedly preparing to submit a $100 billion supplemental funding package to Congress. This package is expected to include $60 billion in aid for Ukraine, with the rest allocated for Israel, Taiwan, and the U.S.-Mexico border. The supplementary funding is intended to support various initiatives, including assistance to Ukraine, munition replenishment, and defense support for Israel. The request aims to provide resources for the fiscal year ending in September. Congress is anticipated to receive details of the funding package in the coming days, with some Republican lawmakers voicing concerns about providing further aid to Ukraine.

The Malaysian government is actively considering the use of the gold dinar as a reserve currency, according to Prime Minister Datuk Seri Anwar Ibrahim. He revealed this during a session in Malaysia’s lower house of parliament, known as Dewan Rakyat. The gold dinar, a historical Islamic gold coin, may be discussed during an upcoming meeting on Islamic economics and finance in December. Anwar highlighted that adopting the gold dinar could help reduce the country’s dependency on the U.S. dollar, especially in trade with Islamic nations. Additionally, the use of the gold dinar is seen as a way to strengthen domestic economies and provide an alternative to the U.S. dollar in international trade.

The Biden administration is planning to halt shipments of more advanced artificial intelligence chips designed by Nvidia and others to China. This is part of a suite of measures aimed at preventing Beijing from acquiring cutting-edge U.S. technologies to bolster its military capabilities. These rules not only restrict a broader range of advanced chips and chipmaking tools but also blacklist Chinese chip designers Moore Thread and Biren. The primary objective is to limit China’s access to advanced semiconductors that could drive breakthroughs in artificial intelligence and sophisticated computers crucial for military applications. These measures do not aim to harm China economically but rather to protect U.S. national security interests. The U.S. and China have been engaged in a long-standing technology war, with these measures further escalating tensions between the two superpowers.

The Call

Since the attack on Israel on October 7th, gold has been advancing almost daily to just under 2000.00 an ounce! Our view last week that gold would test support around 1900.00 an ounce and possibly rally towards 2000.00 an ounce is history.  The war rages on and Israel seems ready to enter its next phase and has amassed tanks and troops near the fenced border around Gaza for a planned ground invasion aiming to annihilate Hamas. Many clashes in the West Bank and the Lebanese border suggest this war is escalating with a high probability of other groups getting involved. These conditions will drive the flight to quality assets with Gold being one of these assets in the driver’s seat. We look for a volatile metals market with prices working there way higher until some sanity appears.

Last Week in Review

Gold opened Sunday evening at 1930.00 spot and then traded a little lower to the 1910.00 area before reaching support. The buying resumed as concerns widened with the war between Israel and Hamas in the Gaza Strip in the Middle East and the potential for this conflict to expand to the West Bank and Lebanon. Gold moved higher from Wednesday through Friday and closed at 1981.30 after hitting a high of 1997.50.

Silver opened at 22.77 on Sunday evening and traded sideways to higher as the week went on. Silver hit its high as well on Friday at 23.74 before pulling back a little to close at 23.39  an ounce.

• The U.S. Dollar Index finished the week little changed around 106.16.
• The Gold/Silver Ratio closed a little stronger for the week at 84.8 ounces of silver for 1 ounce of gold.