Issue 71 – The week of June 26th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

Coming up this week: the last trading week of the month, quarter and the first half of the year. We will receive more updates in the housing market and on Friday the Bureau of Economic Analysis will release the Personal Consumption Expenditures (PMI) The Price Index is the Fed’s preferred inflation gauge. We will also get consumer sentiment readings from the Conference Board and University of Michigan, and the final estimate of first quarter gross domestic product (GDP).

• Monday will be a quiet day with no economic reports scheduled.
• Tuesday at 8:30 AM starts with the Durable- Goods orders for May followed at 9:00 AM by the S&P Case-Shiller home price index in April. Then at 10:00 AM we will get the release of New Home Sales for May and Consumer Confidence for June.
• On Wednesday at 8:30 AM we receive the release of the Advanced U.S. trade balance in goods, Advanced retail inventories for May and Advanced wholesale inventories also for May.
• Thursday, we see the Weekly Initial Jobless Claims in the US at 8:30 AM. Pending home sales for May will be released at 10:00 AM.
• Friday we see Personal Income and Spending for May along with the Fed’s preferred inflation gauge the  PCE Index for May. We will also get consumer sentiment readings from the Conference Board and the University of Michigan business barometer, and the final estimate of first quarter gross domestic product (GDP). 

Geopolitics

The Federal Reserve plans to raise interest rates further this year to combat inflation, which is still too high, according to Chairman Jerome Powell. Powell estimates two more rate hikes before the end of 2023. He testified before the House Financial Services Committee on Wednesday, a week after the Fed decided not to hike rates for the first time in more than a year. Powell said inflation has moderated since mid-2022, but remains well above the Fed’s 2% target. He also said the labor market is tight, but showing signs of loosening. The Fed has raised rates 10 times since March 2022, but inflation is still running at 4.7% year-over-year, according to the Fed’s preferred measure. Powell said the Fed is also attentive to fiscal and regulatory issues affecting the banking sector, which faced turmoil earlier this year. 

The Central Bank of the United Arab Emirates (CBUAE) has recently released data indicating a significant surge in the value of the country’s gold reserves. Over the course of 12 months, spanning from April of the previous year to April of the current year, the United Arab Emirates witnessed a remarkable 41% increase in the value of its gold reserves. At the end of April, the UAE’s gold reserves reached a substantial AED 17.505 billion (equivalent to USD 4.8 billion), marking a substantial upturn from the AED 12.42 billion (USD 3.4 billion) reported in April 2022. Further underlining this growth trajectory, the first four months of the current year saw a notable 9.1% increase in gold reserves, amounting to a sizeable AED 1.46 billion (USD 400 million). These developments in the UAE’s gold reserves warrant close attention from market analysts and investors alike, as they carry potential implications for global gold markets.

Swiss gold exports rebounded in May from a 10-month low, as demand from India surged after a drop in coronavirus cases and easing of lockdowns. According to data from the Swiss customs office, Switzerland exported 126.6 tonnes of gold in May, up from 85.7 tonnes in April. India was the top destination, receiving 74 tonnes of gold, the highest monthly total since December 2019. The increase in Indian demand was driven by lower prices, improved consumer sentiment and the upcoming wedding season. Switzerland also exported more gold to China, Hong Kong, Thailand and Turkey in May, while shipments to the UK and the US declined. Switzerland is a major gold refining and transit hub, and its trade data provide insights into global demand trends.

In a recent development with significant geopolitical implications, the Wagner Group, a privately funded paramilitary organization known for its involvement in Ukraine, made a daring move by attempting a coup within the borders of its home country, Russia. Spearheaded by Yevgeny Prigozhin, the leader of the Wagner Group, a contingent of mercenaries was mobilized to march into Russia with the explicit objective of demanding the removal of the nation’s defense minister. However, in a turn of events, negotiations between Prigozhin and Alexander Lukashenko, the President of Belarus, brought the rebellion to an abrupt halt. Under the deal brokered by Lukashenko, it was announced by the Kremlin that Prigozhin would not face prosecution and would instead depart from Russia to find refuge in Belarus. 

The Titan submersible, owned by OceanGate Expeditions, was exploring the wreckage of the Titanic when it lost contact with a research vessel on the surface. The US Coast Guard confirmed that all five people on board were killed in what is thought to have been a catastrophic implosion of their submersible. A remotely operated vehicle found major fragments of the sub on the seafloor about 1,600ft (480m) from the Titanic shipwreck. The US Coast Guard will lead the investigation into the incident, with the National Transportation Safety Board (NTSB) joining the investigation and contributing to their efforts.

The Call

Federal Reserve Chair Jerome Powell speaking before Congress said that it was a “pretty good guess” that the central bank would hike rates twice more before the end of the year. Powell underscored the rationale for more rate hikes saying” Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go.

The Bank of England surprised the market with a 50-basis point increase to 5%. The BOE was not alone in its action with central banks in Norway, Switzerland, and Turkey also raising rates to slow their respective countries inflationary pressures.

These factors also sparked a deep decline in silver resulting in a larger percentage decline than gold. The weekly price decline of $1.85 per ounce for Silver resulted in a percentage decrease of 7.4% which was 3 times greater than the price decline of Gold. The Silver/Gold Ratio blew out to 85.4 to 1.

Until Gold can put in a higher weekly close, the metals will continue to drift lower with gold testing the $1825.00 area and Silver testing the $20.00 handle. These higher interest rates are here to stay for quite a while!

Last Week in Review

Gold opened the week at 1960 and had a trading range from the high of 1960 which was set on the opening on Sunday evening to a low of 1909 made on Friday morning. Gold was sold all week and closed out the week about 50 dollars lower at 1909. Gold has made a lower weekly high for seven weeks in a row.

• Silver opened the week at 24.24 and the selling wave started and continued all week to the low of 22.14 Friday morning. Silver then rallied 30 cents to close out the week at 22.45.
• The U.S. Dollar Index was firmer to slightly higher this week with a close at 102.87 from a close of 102.30.
• The Gold/Silver Ratio widened this week to 85.6 ounces of silver for 1 ounce of gold. A very large move in the ratio of 4 ounces from 81 – 85 in one week demonstrates how weak silver is now.