Issue 72 – The week of July 3rd, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

This week will be a holiday-shortened trading week with markets closing early on Monday at 1:00 PM and closed on Tuesday, for the 4th of July Independence Day. The latest updates on the labour market will be released with the JOLTS on Thursday followed by the Non Farm Payroll Friday morning. We will receive the FOMC Meeting Minutes on Wednesday.

• Monday will see the release of S&P flash U.S. manufacturing PMI and ISM manufacturing.
• Tuesday is the July 4th holiday – All markets are closed.
• On Wednesday at 8:15 AM we receive the release of the ADP National Employment Report for June followed at 10:00 AM with Factory orders. 2:00 PM sees the release of the Minutes of the Fed’s June FOMC meeting.
• Thursday, we see the Weekly Initial Jobless Claims in the US at 8:30 AM. 9:45 brings the S&P flash U.S. services PMIand at 10:00 we see the Job Openings (JOLTS) report and ISM services. .
• Friday brings the all important Non Farm Payroll employment report along with the U.S. unemployment rate.

Geopolitics

The US government has issued an advisory highlighting the risks associated with engaging in transactions in the African gold sector. The advisory, jointly issued by several US departments and agencies, including State, Treasury, Commerce, Homeland Security, and Labor, as well as USAID, warns of potential risks such as corruption, armed conflict, terrorism, smuggling, human rights abuses, and environmental concerns associated with the African gold industry. The advisory specifically mentions the Wagner Group, the Russian private military company, which derives significant revenue from the African gold sector. Money laundering and terrorist financing risks are also highlighted, as gold’s portability and lack of traceability make it an attractive vehicle for illicit activities. The advisory urges US businesses to conduct thorough due diligence and consult relevant guidelines and organizations to mitigate risks. Precious metal dealers and financial institutions are subject to additional regulatory obligations.

Oil prices saw a slight increase as the recent political turmoil caused by an aborted revolt by Russian mercenaries was not seen as an immediate threat to oil supply from one of the world’s largest producers.  The clash between Moscow and the Russian mercenary group Wagner was peacefully resolved when the mercenaries withdrew from the city of Rostov. Although concerns linger about potential disruptions to Russian oil supply and President Vladimir Putin’s leadership, experts believe that the situation is stable for now and is unlikely to impact oil and gas supplies. Oil prices were also influenced by worries about US interest rate hikes and China’s economic growth. Overall, the market remains cautiously optimistic amidst these developments.

The dollar index increased as Federal Reserve Chair Jerome Powell hinted at the possibility of another rate hike at the central bank’s upcoming meeting in July. Powell, along with other central bankers, spoke at a European Central Bank conference where he indicated that most central bankers foresee two rate increases this year and did not dismiss the potential for more hikes in July. Market expectations for a 25 basis point increase in July rose to 84.3%. The yen, influenced by the Bank of Japan’s loose monetary policy, weakened to a 7-month low against the dollar, prompting concerns of possible intervention by Japanese officials. The euro and sterling both declined against the dollar as the European Central Bank and Bank of England expressed caution regarding inflation and interest rate increases.

Last week the Supreme Court ruled 5-4 that race cannot be a factor in college admissions, overturning decades of affirmative action policies. The majority opinion, written by Justice Barrett, argued that the Constitution requires equal treatment of individuals, regardless of their race. The dissenting opinion, written by Justice Sotomayor, claimed that the decision ignores the reality of systemic racism and its impact on educational opportunities for minorities. The ruling will affect millions of students who apply to colleges every year, as well as the diversity and competitiveness of higher education institutions.

The Call

Gold has finished the last eight weeks lower on the weekly chart. Central Banker’s are saying interest rates must go higher to bring inflation down to 2%. It’s not surprising that gold is testing the 1900 level and will probably have a push lower to the 1850-1860 level in the near term (200 Day Moving Average).But at this point, you can’t blame investors for shying away from gold, as they can get a roughly 5% yield on short term money market funds relatively risk free.

Until gold can put in a higher weekly close, metals will continue to drift lower with gold testing the 200 day moving average area soon and Silver testing the $20.00-21.00 handle. 

Last Week in Review

Gold opened the week at 1928 and had a trading range from the high of 1935 which was set on Monday morning evening to a low of 1892 made on Thursday morning. Gold was sold until this point on Thursday morning when we finally found support and rallied to a high of 1935 Friday afternoon  and closed out the week  lower again at 1920. Gold has made a lower weekly high for eight weeks in a row.

• Silver opened the week at 22.45 and rallied to the high of 23.14 on Tuesday. After this high, silver followed gold lower until Thursday and made a low of 22.29 before rallying back a little to close out Friday at 22.76.
• The U.S. Dollar Index was firmer and closed slightly higher again this week with a close at 102.91 from a close of 102.87.
• The Gold/Silver Ratio closed out the week at 84.4 ounces of silver for 1 ounce of gold. A small move stronger as both gold and silver search for a bottom.