The Precious Metals Week in Review
April 7th, 2017
1. This week was news-heavy, with the release of the March Non-Farm Payrolls report, the meeting minutes from the Federal Reserve’s last Federal Open Market Committee meeting, and a U.S. airstrike on Syria in retaliation for its recent use of chemical weaponry against its citizens.
2. The number of Americans filing initial claims for state unemployment benefits plunged by 25,000 claims to a new level of 234,000 for the week ending April 1. The previous week’s data was revised higher by 1,000 claims. The four-week moving average of claims dropped by 4,500 to a new level of 250,000 from the previous week’s revised average.
3. On Friday, the Non-Farm Payrolls Report was released and the data shocked analysts. New job creation in the U.S. stood at just 98,000 jobs. Economists had expected nearly 180,000 new jobs to be added to the U.S. economy in March. Despite the weak number of job additions, unemployment was brought down to 4.5%. The weak report may not alter the Federal Reserve’s desire to conduct further rate hikes this year unless next month’s report also comes in weaker than expected. The weak report could also signal that the U.S. economy is not anywhere near a “breakout” moment that could send it higher from here, as media outlets have been proclaiming. First quarter economic growth in the U.S. is currently expected to come in at a paltry pace of 1.2 percent.
4. The Federal Reserve released the meeting minutes from its last FOMC meeting this week and they appear to show a Fed that is poised to begin gradually reducing its balance sheet. The minutes said “most participants” expected to start reducing the balance sheet later this year and that it will slowly eliminate asset purchases rather than abruptly ceasing to purchase them. It is likely that the Fed will pause on interest rate hikes as it reduces the size of its balance sheet. If employment data continues to come in weak and the first quarter economic data also comes in weak, then the Fed might also be forced to rethink its next rate hike decision.
5. North Korea continued to defy the United Nations this week, firing another ballistic missile into the sea off its east coast on Wednesday. The launch was just ahead of a meeting between US president Donald Trump and Chinese president Xi Jinping in Florida this week. The U.S. State Department issued a brief, and clearly irritated, response after the incident, saying “North Korea launched yet another intermediate range ballistic missile. The United States has spoken enough about North Korea. We have no further comment”.
6. Late Thursday night, as President Trump was having dinner with Chinese president Xi Jinping, the U.S. carried out an air strike against Syria in response for its use of chemical weapons on its citizens earlier in the week. The U.S. launched 59 tomahawk missiles at a Syrian government-controlled airfield from two warships in the region on Thursday night. The airfield was suspected of participating in the recent attack involving chemical weapons on the rebel-held town of Khan Sheikhoun. Russia called the attack an “aggression against a sovereign state in violation of international law” and dispatched a warship to protect the Syrian coastline. The Kremlin also announced that it was suspending its “air safety agreement” with the US in response to the strikes. The agreement, signed in October of 2015, was designed to avoid conflicts between Russian and US planes over Syria’s airspace.
7. Late on Friday, anonymous U.S. military officials told the Associated Press that the “US is looking into whether Russia participated in Syria’s chemical weapons attack”. According to the article, the officials said that a drone belonging either to Russia or Syria was seen loitering over the site of Tuesday’s chemical weapons attack after it was carried out. The drone reportedly returned later in the day as the town’s citizens were seeking treatment at a nearby hospital which was also then subsequently bombed.
8. Philippine president Rodrigo Duterte ordered troops to occupy some uninhabited islands in the South China Sea that the Philippines claim ownership over. Duterte said “It looks like everyone is making a grab for the islands there. So we better live on those that are still unoccupied. What’s ours now, we claim it and make a strong point from there”. The move is likely to anger China, which lays claim to most of the land in the South China Sea, much to the consternation of several of its neighbors.
9. The Greek government agreed on Friday to implement new reform measures, but there has apparently been no discussion over the date of further bailout payments to Athens. The lack of timing information for further bailout payments could mean that Greece might be unable to pay its creditors in July. Eurogroup President Jeroen Dijsselbloem said on Friday that there had been “significant progress” in talks with Athens but an EU official told CNBC, on condition of anonymity, that it is “now up to the Greek government to implement the pledged reforms and then technical teams will be able to conclude the second bailout review”. The official continued, saying “Once that review is finalized, Greece will receive fresh disbursements from the 86 billion-euro ($91.40 billion) bailout program”.
10. Crude oil prices settled at just over $55 a barrel for Brent Crude on a boost from the U.S. attack on Syria overnight on Thursday. The weekly Baker Hughes count of U.S. oil rigs jumped by another 10 rigs this week to a new total of 672. The continued increase in U.S. supply has oil analysts concerned that the production cap in place by OPEC will not do much to eliminate global over-supply in the long-term.
11. The euro spiked vertically higher against the U.S. dollar at the open this week, but almost immediately returned to its opening levels. The euro trended essentially sideways for most of the week, but began declining Thursday afternoon. That decline accelerated further into Friday after news broke of the U.S. attack on Syria and the euro will close the week lower against the U.S. dollar. The Japanese yen plunged lower at the open this week, but quickly recovered ground and then began an overall trend to the upside against the U.S. dollar. The yen also saw a decline after the U.S. airstrike on Syria but still appears set to close the week higher against the U.S. dollar.
Geopolitical tensions escalated dramatically this week as the U.S. undertook a strategic airstrike against Syrian government military assets late Thursday night in retaliation for a chemical weapons attack that was carried out on Tuesday. The U.S. launched 59 tomahawk missiles targeting an airfield believed to be the source of Tuesday’s chemical attack in Syria. Russia was quick to condemn the U.S.’ action, and their respective ambassadors to the United Nations traded barbs over the incident late on Friday, with the U.S.’ ambassador saying Russia might have been “played the fool” by Syria’s denial over the chemical attack. Mikhail Emelyanov, a member of the Russian parliament, said “This step will have far-reaching consequences. The US are entering into the war in Syria, knowing perfectly well that Russia supports Syria and that our troops are there, i.e. this is fraught with a direct confrontation between Russia and the US, and there could be serious consequences all the way to armed clashes and the exchange of strikes, nothing can be ruled out here”.
The missile strikes, and the fact that they were carried out while Chinese president Xi Jinping was meeting with U.S. president Donald Trump, will also likely bring the growing issue of North Korea’s aggressive posturing into the spotlight. Mr. Trump has long been pressuring China to address North Korea’s ongoing defiance of UN Security Council resolutions banning their launches of ballistic missiles and their continued pursuit of a nuclear arsenal. North Korea fired another missile earlier this week, and the U.S. retaliatory missile strike on Syria proves out that president Trump shows a willingness to engage militarily when pushed. Youngshik Bong, a North Korea expert at Yonsei University in Seoul, said that the missile strikes were an “indirect warning to Pyongyang that once North Korea crosses a red line, Trump will not hesitate to turn the US’s power into action. This is far more effective in terms of etching a strong image of the Trump administration in the mind of Kim Jong Un…it shows Trump is not business as usual”. North Korea, after hearing of the strikes, issued an oddly worded outline of how they would respond to any conflict with the US, saying that their “mode of attack, once launched, would be the precision strike to destroy only the military bases of the US and its vassal forces. As already declared, the DPRK will also take all responsible measures for protecting the legal economic interest of other countries that they hold in South Korea”. It is likely that the strike against Syria may cause North Korea to be more careful with its aggressive posturing and test launches in the short-term, but the long-term result might be an even stronger push to acquire nuclear weapons by Kim Jong Un.
On Friday, another vehicle was used in what is being described as a terror attack in Stockholm, Sweden. An individual drove a truck through a crowded street and into a department store, killing two and injuring many others. Swedish Prime Minister Stefan Löfven said “Everything indicates that this is a terrorist act”. The suspect escaped in the aftermath of the event, but Swedish police said they had arrested a potential suspect by mid-afternoon. It will be important to monitor news outlets for further information over the weekend. News from President Trump’s summit with Chinese President Xi Jinping is likely to continue to trickle out throughout the weekend, and Russia will certainly continue to express its displeasure over the Syrian air strikes. Savvy investors have long recognized the growing geopolitical tensions across the globe and strive to keep their portfolios as diversified as possible to avoid overexposure to a single asset class. One such means of diversification is the purchase of physical precious metals, which are frequently regarded as a “safe haven” in times of geopolitical uncertainty and rising inflation.
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.
Trading Department
Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
| Mar. 31st 2017 | Apr. 7th 2017 |
Net Change |
|
|
Gold |
$1249.20 | $1255.20 |
6.00 + 0.48% |
|
Silver |
$18.24 | $18.18 |
(0.06) – 0.33% |
|
Platinum |
$949.70 | $955.00 |
5.30 + 0.56% |
|
Palladium |
$798.50 | $801.00 |
2.50 + 0.31% |
| Dow Jones | 20663.22 | 20659.34 |
(3.88) – 0.02% |
Previous year Comparisons
| Apr. 8th 2016 | Apr. 7th 2017 | Net Change | |
|
Gold |
$1243.80 | $1255.20 | 11.40 + 0.92% |
|
Silver |
$15.38 | $18.18 |
2.80 + 18.21% |
|
Platinum |
$968.50 | $955.00 |
(13.50) – 1.39% |
| Palladium | $538.50 | $801.00 |
262.50 + 48.75% |
| Dow Jones | 17576.96 | 20659.34 |
3082.38 + 17.54% |
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1220/1200/1190 17.90/17.50/17.20
Resistance 1250/1275/1300 18.35/18.75/19.00
Platinum Palladium
Support 930/880/860 790/740/710
Resistance 975/995/1025 815/840/875