1. Stock market volatility continued this week as a round of economic data was released in the U.S. which included figures for inflation and retail sales. The Olympic games in South Korea continued to split the attention of the media.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment jumped by 7,000 claims to a new level of 230,000 for the week ending February 10. The previous week’s level was revised higher by 2,000 claims. The four-week moving average of claims increased by 3,500 to a new level of 228,500 from the previous week’s revised average. The previous week’s 4-week moving average of claims was revised higher by 500. Claims taking procedures in both the Virgin Islands and Puerto Rico have still not returned to 2017 pre-hurricane norms. Unemployment data should be expected to remain volatile through the end of February, and will likely be subject to further revisions.
3. The Dow Jones Industrial Average shook off last week’s jitters and pushed its way back over the 25,000 mark once more as the average headed for its best weekly performance in nearly a decade. When the carnage that began two weeks ago finally came to its conclusion, major stock averages had fallen over 10 percent. Analysts are still confused over what triggered the correction, which coincided with a U.S. Labor Department report that finally showed an increase in hourly earnings. Many blamed the correction on fears that inflation could be growing at a faster pace than the Federal Reserve anticipated, but stronger-than-expected inflation data that was released in the U.S. this week failed to trigger a similar negative reaction and stocks continued to recover some of their previous gains. Regardless of the cause, most analysts now agree that the massive volatility experienced over the last several weeks is likely here to continue for the near term.
4. Economic data out of the U.S. added to fears that inflation may be accelerating faster than the Federal Reserve may have anticipated this week. The Consumer Price Index rose more than expected, according to a report released on Wednesday, and a report on Producer prices that came out on Thursday also showed price gains across the board, partly on increasing gasoline and health care costs. The data, coinciding with a weaker U.S. dollar and an apparently tightening labor market, could act to rattle equity markets again, particularly if the Federal Reserve appears to be considering the option of raising rates at a faster pace than originally anticipated.
5. Lunar New Year, also known as Chinese New Year, kicked off on Friday and is expected to bring a week of spending sprees across the globe as travelers from mainland China head out for vacation. 6.5 million travelers are expected to head overseas, spending billions over the week-long festival. Many Asian markets will be closed during the holiday period and frequently the drop in trading volume across Asia means other global markets tend to show a bit more volatility.
6. North Korea’s leader, Kim Jong Un, has apparently invited South Korean president Moon Jae-in to Pyongyang “at an early date” for a summit. If the meeting actually does take place, it would be the first such meeting in more than a decade. The invitation was apparently extended during discussions and a lunch that Moon had with Kim Jong Un’s younger sister, Kim Yo Jong while she was in South Korea for the Olympics. Moon Jae-in came to power following the downfall of the previous South Korean administration on talk of possibly taking a softer stance on North Korea than his predecessors.
7. Reports surfaced this week that Moscow and Beijing may be developing “anti-satellite weapons as a means to reduce U.S. and allied military effectiveness.” In a joint report, with input from the CIA, the FBI and the National Security Agency, it was noted that “Of particular concern, Russia and China continue to launch ‘experimental’ satellites that conduct sophisticated on-orbit activities, at least some of which are intended to advance counterspace capabilities.” The report also noted that “if a future conflict were to occur involving Russia or China, either country would justify attacks against U.S. and allied satellites as necessary to offset any perceived U.S. military advantage derived from military, civil, or commercial space systems.”
8. The U.S. Commerce Department announced on Friday that it was recommending that the Trump administration place steep tariffs and/or quotas on steel and aluminum imports from China, Hong Kong, Russia, Venezuela and Vietnam. The recommended tariff on steel is for 24 percent on imports globally, or at least 53 percent on steel from a list of nearly a dozen different countries. The recommended tariffs on aluminum would be 7.7 percent on all aluminum imports, or 23.5 percent on the specific countries listed above. President Trump has 90 days to review the findings and recommendations in the Commerce Department’s report and would then decide whether following any of the recommendations would be in the U.S.’ best interests.
9. German Chancellor Angela Merkel appeared to show support for the ongoing Brexit negotiations between the U.K. and the European Union at a press conference following talks on Friday. Ms. Merkel said “In the end there needs to be a fair balance of divergence, from the single market for example, and on the other hand a partnership that is not too close. This can be achieved and the (EU) 27 will ensure that the relationship (with the UK) is as close as possible but that there is a difference to membership (in the EU). She posed for pictures while shaking hands with U.K. Prime Minister Theresa May and said that she was not frustrated with the way the negotiations were going and that the EU should stick to the original timetable for the exit process.
10. U.S. Crude broke its two-week losing streak, rising back over the $60-a-barrel mark once more. Surging U.S. production continues to put pressure on prices despite further supportive comments from OPEC that the output cuts were expected to continue through the end of 2018.
11. The euro rose fairly steadily against the U.S. dollar this week, only experiencing brief dips late on Wednesday after the U.S. inflation data was released, and again on Friday just before market close. Neither dip was enough to take the euro into negative territory for the week and it will close out the week higher against the U.S. dollar. The Japanese yen moved sideways against the U.S. dollar at the start of trading for the week but soon began moving higher and trended higher through the rest of the week. The yen will also close the week out higher against the U.S. dollar.
Trading should be expected to be somewhat light next week as most Asian markets will close for the Lunar New Year holiday period. U.S. markets will also be shortened next week as they will be closed on Monday for President’s Day.
Market volatility in equities might be expected to continue, especially as further details from Special Counsel Robert Mueller’s indictments of 13 Russian individuals and three Russian entities are released next week. The 37-page indictment was released on Friday just prior to the closing bell and with markets closed on Monday, analysts will have plenty of time to delve deeply into the document to assess the impact that the indictments may have on markets. One key takeaway from the indictment was the statement that “Some defendants, posing as U.S. persons and without revealing their Russian association, communicated with unwitting individuals associated with the Trump Campaign and with other political activists to seek to coordinate political activities.” Deputy Attorney General Rod Rosenstein spoke to the press on Friday and repeatedly said that his comments were specific to the federal grand jury indictment that the special counsel’s office had just announced when he said that the indictment showed no allegations of American involvement or any specific impact to the election.
President Trump took to Twitter following the release of the report to reiterate that it showed no evidence of collusion with anyone from the Trump campaign and that it showed instead that his campaign “did nothing wrong” during the 2016 election. Market reaction was brief in equities following the release of the indictments, initially selling off somewhat but quickly recovering after it became apparent that there would be no allegations of ties of collusion between the Trump campaign and the Russian individuals and entities named in the document.
In Europe, negotiations continued between the U.K. and the E.U. over the implementation of “Brexit”. Germany appears to believe that negotiations are going smoothly, if Angela Merkel’s apparent attitude can be believed. Chancellor Merkel was very outspoken at a press conference she held with U.K. Prime Minister Theresa May on Friday after talks in Germany, posing for photos with the Prime Minister and calling for a “fair balance of divergence” and a “partnership that is not too close” but still “close as possible”. Merkel went on to state that she was not frustrated with the ongoing negotiations and that she thought the EU should stick to the original Brexit timetable.
Lastly, late on Friday the Commerce Department released recommendations that the Trump administration should impose heavy tariffs and/or quotas on steel and aluminum imports into the U.S. President Trump will have 90 days to review the 262-page report and decide on a course of action.
Inflation data will likely continue to be the primary focus for equity markets in the coming weeks, particularly if inflation shows signs of accelerating on a global basis. The most recent U.S. data has sparked speculation that the Federal Reserve may step up the pace of its interest rate hikes if inflation truly begins moving faster than they expected. There also appear to be signs that the Fed may have been partly responsible for the v-shaped recovery in stocks this week.
The central bank appears to have added $11 billion to its “System Open Market Account” for the week ending February 14, meaning it effectively purchased $11 billion in mortgage securities directly from banks. This procedure was creatively named “Quantitative Easing” during the height of the financial crisis, and the Fed is supposed to have stopped such actions and instead is supposed to be engaged in winding its balance sheet down.
Remember that precious metals should always be viewed as a long-term investment and that the key to profitability through the ownership of physical precious metals is to actually acquire and own the physical products and to hold them for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long term.
Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
|Feb 9th2018||Feb 16th2018||Net Change|
|Gold||$1315.50||$1354.00||38.50 + 2.93%|
|Silver||$16.22||$16.78||0.56 + 3.45%|
|Platinum||$960.00||$1013.50||53.50 + 5.57%|
|Palladium||$968.50||$1044.00||75.50 + 7.80%|
|Dow Jones||24190.90||25219.38||1028.48 + 4.25%|
Previous year Comparisons
|Feb 17th2017||Feb 16th2018||Net Change|
|Gold||$1238.60||$1354.00||115.40 + 9.32%|
|Silver||$18.06||$16.78||(1.28) – 7.09%|
|Platinum||$1005.00||$1013.50||8.50 + 0.85%|
|Palladium||$781.00||$1044.00||263.00 + 33.67%|
|Dow Jones||20624.05||25219.38||4595.33 + 22.28%|
Here are your Short Term Support and Resistance Levels for the upcoming week.