The Precious Metals Week in Review
March 24th, 2017
1. This week was filled with market-impacting events, both on a geopolitical level and a macro-economic basis.
2. The number of Americans filing initial claims for state unemployment benefits surged by 15,000 claims to a new level of 261,000 for the week ending March 18. The previous week’s data was also revised higher by 5,000 claims. The four-week moving average of claims increased by 3,500 claims to a new level of 246,500 from the previous week’s average, which was also revised higher by 5,750 claims. The sudden surge in unemployment claims, if the trend continues, could put pressure on the Federal Reserve to refrain from carrying out additional interest rate hikes this year. The Fed has stated that it intends to conduct at least two more interest rate hikes this year, if the U.S. economy continues to show improvement.
3. The much-discussed health care replacement bill in the U.S. apparently was on the verge of becoming a governmental crisis this week. Republican leaders in Congress did not garner enough support to pass the bill in the House of Representatives on Thursday and President Trump, fed up with the constant back-and-forth negotiations over the bill, said that if the House does not vote on the legislation on Friday then he will leave the Affordable Care Act (ACA) in place and move on to other items. The ACA, commonly called ObamaCare, is apparently on the verge of utter failure with costs for the program spiraling out of control and insurers choosing to abandon their support for the marketplace. House Speaker Paul Ryan said on Thursday night “We have been promising the American people that we will repeal and replace this broken law because it’s collapsing and it’s failing families and tomorrow we’re proceeding [with a vote].” The last minute decision on Friday to call off the vote could be a huge political embarrassment, not only for the Trump administration, but for the Republican party as a whole who has been promising the American public that they would repeal the bill almost from the day it was passed under Obama.
4. On Wednesday, North Korea attempted to launch yet another missile, which apparently failed and exploded seconds after lifting off. A South Korean military official told NBC News “We confirm that North Korea has launched one missile from Wonsan airbase this morning (KST) and failed. We are in the process of analyzing the type of the missile. South Korea’s military is fully prepared for the possibility of North Korea’s additional missile launch.” U.S. Commander Dave Benham said “U.S. Pacific Command detected what we assess was a failed North Korean missile launch attempt…in the vicinity of Kalma. A missile appears to have exploded within seconds of launch.”
5. Reuters reported on Monday that the Trump administration was considering “sweeping sanctions as part of a broad review of measures to counter North Korea’s nuclear and missile threat.” Choe Myong Nam, the deputy ambassador at the North Korean mission to the United Nations in Geneva told Reuters on Tuesday “In the light of such huge military forces involved in the joint military exercises, we have no other choice but to continue with our full acceleration of the nuclear programs and missile programs. It is because of these hostile activities on the part of the United States and South Korea, we strengthen our national defense capability as well as pre-emptive strike capabilities with nuclear forces as a centerpiece.”
6. In Europe this week, London was the victim of another terrorist incident as an individual drove his vehicle through the crowded Westminster Bridge near parliament and then exited the vehicle and entered Parliament to stage an attack, killing one police officer near the House of Commons and causing several deaths and injuries upon the crowded bridge. Belgian authorities also raised security levels in the port of Antwerp after reports surfaced that a vehicle bearing French license plates was driving at high speed through a busy shopping district, forcing pedestrians to jump out of the way to avoid it. The vehicle was pulled over at the docks and the driver was arrested after authorities found knives, a shotgun and a full gas can inside the car. Both of the attacks came on the anniversary of last year’s Brussels airport and subway system attacks, which resulted in the deaths of 32 people on March 22, 2016.
7. Italy has largely been out of the spotlight lately, despite the fact that it too will be holding elections in the near future to replace its Prime Minister, who resigned last year after failing to get constitutional reforms passed in a referendum. Beppe Grillo, the leader of the anti-establishment and populist Five Star Movement, saw a notable surge in the latest opinion poll of candidates. Grillo has called for holding a referendum on Italy’s own membership in the EU and his surge in the polls could be concerning for the continued viability of the euro experiment. Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics told CNBC this week that “If Five Star Movement could secure 30 or 40 percent of the vote then of course that would be extremely worrying for the euro area’s stability. Whether they can gain an absolute majority…we’ll have to wait and see.” Italy is currently slated to hold its next national election in early 2018 and weak economic growth, combined with an as-yet unresolved banking crisis, could mean further public support for Grillo’s party if nationalist tendencies continue to grow across the region between now and the elections.
8. Crude oil prices slumped for most of the week, closing just over $50 a barrel for Brent crude on Friday as concerns continue over global over-supply of oil. The Baker Hughes weekly oil rig count in the U.S. saw its 10th straight gain as U.S. drillers brought 21 more rigs online. A Saudi energy ministry official told Reuters this week that the country intended to cut exports to the U.S. by about 300,000 barrels per day from February levels and that they would remain there for the next few months in an effort to rebalance record global crude inventories.
9. The euro began the week with a brief dip and then a slight rise against the U.S. dollar through Monday morning’s trading. The euro began dropping late Monday morning, but a vertical move to the upside late Monday night sent the euro back into positive territory for the week. The euro spent the rest of the week trending slightly to the downside, but another vertical surge on Friday as the U.S. Congress pondered a vote on the healthcare bill appears set to see the euro close the week higher against the U.S. dollar. The Japanese yen spent much of the week trending fairly steadily higher against the U.S. dollar. A slight reversal late on Wednesday was quickly overcome but the yen had peaked by late Thursday and trended sideways through the rest of the week. The yen is set to close the week higher against the U.S. dollar.
Global geopolitical and macroeconomic concerns should be expected to continue in the coming weeks and months. In the U.S., the fact that the stock market plunged by over 100 points solely on speculation of the theoretical outcome of a vote on a single piece of legislation this Friday shows how volatile stock markets continue to be. “Politics as usual” has been turned on its head in the U.S. with the election of Donald J. Trump to the office of President. The brash and frequently abrasive leader continues to keep members of Congress on their toes with the unpredictable nature of his style of governing. World leaders have also been kept guessing by the leadership style of President Trump and his apparent “America First” policies. Yale University’s Steven Roach, the former Asia Chairman for Morgan Stanley, said on Monday that the G-20 meeting over the weekend was both “disappointing” and “disturbing”. The two-day meeting failed to end in a compromise and the G-20 finance ministers essentially dropped their explicit support for keeping global trade free and open. The G-20 meeting requires full consensus to resolve issues and the meeting was described as “19 against one” at times, with the “one” dissenter being the U.S. In Greece, police have intercepted multiple “suspect packages” in the last few weeks, with one “letter bomb” actually reaching the International Monetary Fund and injuring one person in Paris last week. Greece continues to struggle under a massive debt load and crippling austerity measures forced upon it as a result of multiple bailout programs it has requested since 2010 and its population appears to be growing increasingly agitated.
This week alone, Greek authorities reported that they found eight suspect packages “which listed as recipients, persons in European countries”. An anonymous official disclosed to Reuters that the packages were “addressed to officials at economic institutions and companies”. After two terror-style incidents this week, one resulting in deaths in London and another that was apparently foiled in Brussels before it could be fully carried out, Turkish president Tayyip Erdogan callously said (in reference to a recent dispute with Germany and the Netherlands over his push to increase his governmental powers) “Turkey is not a country you can pull and push around, not a country whose citizens you can drag on the ground. If Europe continues this way, no European in any part of the world can walk safely on the streets. Europe will be damaged by this. We, as Turkey, call on Europe to respect human rights and democracy”. In the U.K., as preparations for “Brexit” continue, the European Commission president Jean-Claude Juncker told the BBC on Friday that the U.K. “cannot pretend that it was never a member of the union. The British government and parliament took on certain commitments as EU members and they must be honoured. This isn’t a punishment or sanctions against the UK”. Mr. Juncker’s comments were in reference to an “exit bill” of nearly 60 billion euros ($64.79 billion US) which has been calculated by EU officials for the UK’s share of debts, pensions and unpaid bills. The EU’s chief negotiator for the “Brexit” process, Michel Barnier, said “When a country leaves the union, there is no punishment. There is no price to pay to leave, but we must settle the accounts. No more, no less. We will not ask the British to pay a single euro for something they have not agreed to as a member”.
The UK government is supposed to begin the exit process next Wednesday and UK Finance Minister Philip Hammond said that he “does not recognize the numbers used by the EU” and trade secretary, Liam Fox, called the bill “absurd”. The UK also saw inflation shoot past its 2% target last month, coming in at 2.3% with signs that it may climb further as Brexit negotiations take their toll on the pound and global oil prices attempt to stage a recovery. The Bank of England expects inflation to peak at 2.8 percent in the second quarter and last week it voted to hold rates steady on continued weak wage growth and projected economic uncertainties due to the Brexit process. As geopolitical and macroeconomic uncertainties continue to be the “new normal”, savvy investors continue to follow their plan on diversifying their investment portfolios to ensure that they are not over-exposed to any single asset class. One such diversification method is to accumulate additional physical precious metals for their portfolios whenever temporary price dips present them with a buying opportunity to do so. Precious metals have been a traditional “safe haven” play against times of uncertainty and rising inflation and these wise investors, realizing the long-term nature of investing in metals, long-ago realized that the time to make their purchases is before global uncertainty begins to surge and before inflation takes significant hold in global economies.
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.
Article by: Trading Department – Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
Mar. 17th 2017 Mar. 24th 2017 Net Change
Gold $1231.10 $1249.00 17.90 + 1.45%
Silver $ 17.44 $ 17.77 0.33 + 1.89%
Platinum $ 963.00 $ 969.00 6.00 + 0.62%
Palladium $ 778.50 $ 813.00 34.50 + 4.43%
Dow Jones 20914.62 20596.72 ¡(317.90) – 1.52%
Previous year Comparisons
Mar. 24th 2016 Mar. 24th 2017 Net Change
Gold $1221.50 $1249.00 27.50 + 2.25%
Silver $ 15.18 $ 17.77 2.59 + 17.06%
Platinum $ 952.50 $ 969.00 16.50 + 1.73%
Palladium $ 572.50 $ 813.00 240.50 + 42.01%
Dow Jones 17515.94 20596.72 3080.78 + 17.59%
Here are your Short Term Support and Resistance Levels for the upcoming week.
Support 1220/1200/1190 17.55/17.20/16.80
Resistance 1250/1275/1300 17.85/18.20/18.60
Support 930/880/860 790/740/710
Resistance 975/995/1025 815/840/875