The Precious Metals Week in Review – April 21, 2017

The Precious Metals Week in Review

April 21st, 2017

1. Some areas took a holiday on the Monday after Easter, making for another shortened trading week for some markets. Anticipation over the upcoming elections in France over the weekend continue to be one of the primary factors creating volatility in markets over the weekend and into next week.

2. The number of Americans filing initial claims for state unemployment benefits surged by 10,000 claims to a new level of 244,000 for the week ending April 15. The previous week’s data was unrevised. The four-week moving average of claims dropped by 4,250 to a new level of 243,000 from the previous week’s unrevised average.

3. The U.S. Congress is under pressure from the Trump administration to get moving on the President’s reforms agenda. Mr. Trump said ‘I think we’ll get both’, meaning a vote on health care and another vote to keep the government funded next week and prevent yet another shut down. Mr. Trump seemed confident, despite the fact that there are no official votes on health care scheduled for next week in Congress and no revised bill has made an appearance. Congress does not return from recess until next week and they will have just days before the previous “continuing resolution” to fund the U.S. government expires. It is highly unlikely that the dysfunctional body that is the U.S. Congress will be able to pass both another resolution to “raise the debt ceiling” and come up with a satisfactory replacement for Obamacare within one week. A Republican congressman, speaking on condition of anonymity, told CNBC that Republicans could move to extend government funding through temporary measures for just one week while budget negotiations continue, but health care was still in process.

4. Vice President Pence, speaking from the deck of the USS Ronald Reagan this week said “Those who would challenge our resolve or readiness should know, we will defeat any attack and meet any use of conventional or nuclear weapons with an overwhelming and effective American response”. North Korea Responded in usual fashion, with the Rodong Sinmun saying “In the case of our super-mighty preemptive strike being launched, it will completely and immediately wipe out not only U.S. imperialists’ invasion forces in South Korea and its surrounding areas but the U.S. mainland and reduce them to ashes”.  The Rodong Sinmun is the official newspaper of the ruling Workers’ Party in North Korea.

5. The reclusive state of North Korea test launched another missile last weekend during its annual celebration of its founder’s birth. The launch came as no surprise, due to rising tensions between the U.S. and North Korea, but the missile exploded almost immediately after it was launched. There were indications last week that the North may be preparing to conduct yet another nuclear test and it was thought that they might have chosen last weekend to show the world that they continue to pursue a nuclear arsenal in defiance of years’ worth of sanctions. U.S. officials told NBC News that they “expect that they are able to do it [conduct a nuclear test] at any time, without any real warning. They have been engaging in steady preparations.”

6. South Korea said on Friday that it was in a state of heightened alert ahead of another upcoming celebration marking the 85th anniversary of North Korea’s army. There appears to also be an elevated level of activity by Chinese bombers in the area, possibly signaling that Beijing may finally be growing tired of the North’s reckless behavior, with respect to its nuclear ambitions. China’s Defense Ministry denied the reports of heightened bomber activity on Friday, but U.S. observations appear to refute the Defense Ministry’s claims.

7. In yet another example of growing global nationalist tendencies, Australian Prime Minister Malcolm Turnbull announced plans to terminate their “457 visa program”. The program currently allows skilled migrants to work in Australia for up to four years. Turnbull said, regarding the ending of the program, “We’re putting jobs first. We’re putting Australians first…We are an immigration nation but the fact remains – Australian workers must have priority for Australian jobs”.

8. In France, the Islamic State claimed responsibility for an apparent terrorist attack which left one police officer dead and two others wounded. Far-right presidential candidate Marine Le Pen said “We cannot afford to lose this war. But for the past ten years, left-wing and right-wing governments have done everything they can for us to lose it. We need the presidency which acts and protects us.” Ms. Le Pen urged the government to immediately restore state borders and expel all foreign nationals who are currently under surveillance in the wake of the attack. Elections in France begin this weekend in the first of a two-round vote to elect a new President. Opinion polls place Ms. Le Pen in a near tie with her centrist opponent and both are expected to make it to the run-off vote on May 7.

9. In Turkey, Presdident Tayyip Erdogan’s push for broader powers was successful over the weekend in a narrow win on his referendum to overhaul Turkey’s entire political system. Turkey’s main opposition party filed a court appeal on Friday against a controversial decision by electoral authorities to accept ballot papers which were not stamped. Erdogan, when asked about the appeal by reporters on Friday said “This is over. The people have decided and the national will has made its voice heard.” In the wake of the referendum, Turkey may have seriously crippled its long-running attempt to enter the European Union. Austrian Chancellor Christian Kern said, in a statement on Monday, that Turkey’s “membership prospects are buried”.

10. Russian long-range bombers, which are nuclear capable, twice flew routes off the coast of Alaska this week. The first incident on Monday resulted in the U.S. scrambling fighters to escort the aircraft, but the second incident resulted only in the launch of a single radar-capable aircraft to monitor their flight. Russia also conducted similar flights off the coast of Japan while U.S. Secretary of State Rex Tillerson was visiting, resulting in the Japanese scrambling a total of 14 fighter jets to escort three Russian long-range bombers. There were also reports of a Russian spy plane being sighted off the coast of Japan that same week.

11. Crude oil prices dropped back below $50-a-barrel this week on growing concerns that the OPEC-led production cap agreed to in November will not do enough to reduce global over-supply of oil. Saudi Arabia and Kuwait both say that they favor extending the production cap but Russia’s Energy Minister declined to comment on it. The next joint meeting to discuss the cap occurs on May 25.

12. The euro trended steadily higher against the U.S. dollar through late Tuesday afternoon before settling into a sideways trend through Thursday morning. The euro saw a brief vertical surge higher on Thursday, but could not maintain momentum and soon dropped back into its sideways trend. The euro saw a small dip on Friday, but still appears set to close the week higher against the U.S. dollar. The Japanese yen took a vertical, but brief plunge to the downside against the U.S. dollar to start the week, but soon surged back into positive territory. The yen saw a relatively steep plunge late on Monday, but had recovered much of its ground by late Tuesday. Wednesday morning, the yen began a steady trend lower and despite a recovery that began on Friday morning, the yen appears set to close the week out lower against the U.S. dollar.

This weekend promises to be yet another news-worthy event in a world seemingly full of ever-growing economic and geopolitical uncertainty. The world will be highly focused on the outcome of the first round of elections in France on Sunday. The vote is being described as “the most uncertain election ever in French politics” and at least two of the candidates have called for France to hold a referendum of its own on exiting the European Union if they emerge victorious. France is the second-largest economy in the eurozone and its exit could spell the end for the unified currency and the EU project as a whole. If this weekend’s elections result in an outright victory for any candidate, then that candidate will immediately emerge as France’s new leader.

The more likely scenario is that none of the candidates win a clear majority and a second round of voting will take place on May 7 to determine the final victor. Marine Le Pen is widely expected to make it to the run-off round and is one of the candidates in favor of France’s exit from the EU. A terror-related attack on Thursday that left one police officer dead and two others wounded will likely be weighing on voters’ minds as they head to the polls Sunday and may influence any voters who have been “on the fence” over who they should vote for. Ms. Le Pen has long advocated for more security in France in the wake of multiple terror attacks across the country over recent years and it is possible that this will give her an edge in the polls. Christine Lagarde, Managing Director of the International Monetary Fund told CNBC that a strong showing by Ms. Le Pen on Sunday “would certainly unveil major disorder and the risk of dislocation”.  Ms. Lagarde continued, saying “First of all, I think the [EU] project itself has protected us from the horrors of war, and we need to keep that in mind even for the younger generations which have not known any of that. But we were at our throats for centuries.  The fact that we have had nearly 70 years of peace and amicable and constructive relationships is a jewel, and it needs to be secured.”

While France will be the primary focus over the weekend, North Korea could also trigger further market moves as it makes plans to observe the 85th anniversary of the founding of its Korean People’s Army on April 25th. The observance comes at a time when the U.S. and South Korea are coming to the end of their annual joint military drills, and last weekend’s failed missile launch could have the regime eager to make a successful show of strength during the observance of its army’s formation. Such a show of strength could come in the form of yet another mid-to-long-range missile test, or perhaps even a sixth nuclear test, which would be in direct defiance of bans and sanctions in place on the reclusive state’s nuclear ambitions. In the background to these major news items, the U.S. Congress will return from recess next week, and its first order of business will likely be passing some sort of resolution to continue to fund the U.S. government while budget negotiations continue. The U.S. government, under President Obama, experienced multiple shutdowns over raising the so-called “debt ceiling”.

Stalemates between the Republican and Democrat parties resulted on those shutdowns and now that Republicans have complete control over Congress, it will be interesting to see how it will be handled, now that the issue has come up once again. Without a resolution, the U.S. government will likely shut down, at least partially, as funds dry up for its various offices. As we enter another weekend in the shadow of global uncertainty it will be important, as always, to monitor global news sources for events that could trigger a move higher in the markets. Savvy investors continue to watch for buying opportunities that will allow them to purchase additional physical precious metals at a discount, for the purposes of keeping their portfolios diversified.

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)

Previous year Comparisons

Here are your Short Term Support and Resistance Levels for the upcoming week.

Gold                                Silver
Support               1260/1240/1220              17.90/17.50/17.20
Resistance          1290/1310/1340               18.35/18.75/19.15

Platinum                            Palladium
Support              930/880/860                     790/740/710
Resistance          975/995/1025                    815/840/875

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© 2017, Precious Metals International, Ltd.