Issue 73 – The week of July 10th, 2023

Key Resistance and Supports: Upcoming Week

Reports of Note due out this week:

This week will see the latest inflation readings released with the June Consumer Price Index (CPI) on Wednesday and Producer Price index (PPI) on Thursday. On Friday the University of Michigan will report the preliminary reading of its Consumer Sentiment Index for July, providing a timely update on consumer confidence.

• Monday will see the release of Wholesale Inventories at 10:00 AM.
• Tuesday will be a quiet day with no economic indicators being released.
• Wednesday at 8:30 AM we see the release of the June Consumer price index (CPI) along with Core CPI on inflation.
• Thursday, we see the Weekly Initial Jobless Claims in the US and the Producer Price Index (PPI)on inflation (Jun) at 8:30 AM.
• On Friday the University of Michigan will report the preliminary reading of its Consumer Sentiment Index for July, providing a timely update on consumer confidence at 10:00 AM.

Geopolitics

Ukrainian President Volodymyr Zelensky stated in an interview that Ukraine will prepare for European Union (EU) membership once the war with Russia concludes. Zelensky emphasized that Ukraine is a respected country fighting for human rights, freedom, and democracy. He believes Ukraine will become a valued partner of NATO, with strong armed forces in Europe. Zelensky has previously advocated for EU admission and stated that a majority of Ukrainians support NATO and EU membership. He acknowledged that after the war, Ukraine will make necessary changes to its legal framework to become an EU member state. Zelensky is also pushing for NATO membership, although President Biden expressed reservations, citing the need for Ukraine to meet certain qualifications such as democratization before joining NATO.

The gold market may experience a boost as the BRICS nations (Brazil, Russia, India, China, and South Africa) are reportedly set to introduce a new trading currency backed by gold. This development aligns with the ongoing trend of de-dollarization in the global economy, as central banks have been increasing their gold reserves to diversify away from the US dollar. Analysts see a gold-backed currency as the next step in this process, potentially enhancing the credibility of currencies like China’s yuan. Geopolitical uncertainty caused by the US government’s actions against Russia has also contributed to the interest in alternative currencies. However, while the news supports gold, experts believe it will take time before its impact is fully realized. Some analysts caution that the specifics of the gold-backed currency, such as its convertibility into gold, remain uncertain, and it is unclear if the BRICS nations aim to challenge the fiat money system or establish a new trade financing bank.

US Treasury Secretary Janet Yellen held informal talks with China’s now former central bank governor Yi Gang, discussing the global, US, and Chinese economies. The meeting aimed to ease tensions between the two superpowers, although expectations for major breakthroughs were low. Both sides acknowledge that national security concerns now take precedence over deepening economic ties. While the details of the conversation were not disclosed, Yellen emphasized the importance of healthy economic competition and collaboration on global challenges. China expressed hope that the US would take concrete actions to create a favorable environment for bilateral economic and trade relations. US firms in China anticipate that Yellen’s visit will help maintain open trade and commercial channels, regardless of geopolitical tensions. Yellen also met with Pan Gongsheng, the newly appointed party chief of the People’s Bank of China (PBOC). Pan’s elevation to PBOC party chief has led to expectations that he will assume the governor title, succeeding Yi Gang, who has reached the retirement age of 65. Yellen’s meetings with Chinese officials highlighted the prominence of Pan in China’s economic

The Call

The question out there now is which jobs report is the correct one. The ADP  number of 497,000 private jobs created or the Governments soft NFP number of 209,000?ADP strong number caused gold to sell off. The next day Non-Farm Payroll from the government comes out and shows a slight weakening in the overall jobs number and gold subsequently rallies. Did gold rally with fresh buying or was it the selling off of the US Dollar to a 2 week low that took gold higher. Gold has made a lower weekly high for nine weeks in a row now and is possibly showing signs of trying to put a bottom in with a higher low this week. There is still the expectation that the Fed will raise rates in July and possibly 1 more time before the end of the year trying to bring inflation down to 2%. There seems to be solid support for gold at the 1900 level. The $64,000 question is will gold hold this support? My feeling is no. Until Gold can put in a higher weekly close, the metals will continue to drift lower with gold testing the 200-day moving average area and Silver testing the $20.00-21.00 handle. 

Last Week in Review

Gold opened the week at 1922 and had a trading range from the high of 1937 to a low of 1902 made on Thursday morning. Gold made a retest of the current low at 1892 and support came in at 1902.The Non Farm Payroll number on Friday helped gold rally to 1935 and closed out the week at 1925. Gold has made a lower weekly high for nine weeks in a row and is possibly showing signs of a bottom with a higher low this week.

• Silver opened the week at 22.80  and rallied to the high of 23.34 on Wednesday, dipped and like gold rallied with the NFP number Friday to settle at 23.09.
• The U.S. Dollar Index was firmer for most of the week until Friday mornings Non Farm Payroll number was released. The Dollar then sold off to close down on the week and at new 2 week low of 102.27.
• The Gold/Silver Ratio closed out the week at 83.5 ounces of silver for 1 ounce of gold. A small move stronger as both gold and silver search for a bottom.