The Precious Metals Week in Review
May 12th, 2017
1. The Macron victory in the elections in France over the weekend may mean that news out of Europe could be relatively benign in the near term. Primary focus for media and news outlets will likely now shift back to the Trump administration’s efforts to accomplish its goals.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment benefits dipped by 2,000 claims to a new level of 236,000 for the week ending May 6. The previous week’s data was unrevised. The four-week moving average of claims increased by 500 to a new level of 243,500 from the previous week’s unrevised average.
3. Consumer sentiment in the U.S. climbed to an estimated 97.7 percent in mid-May, carrying over from April’s reading of 97. The U.S. Commerce Department announced on Friday that retail sales in the U.S. had increased 0.4 percent in April from March. Prior to this, retail sales had been increasing only sluggishly, up just 0.1 percent in March and actually declining in February. The faster increase in retail sales may indicate that U.S. economic growth may accelerate in the second quarter on the back of consumer purchases.
4. President Trump made waves throughout the political spectrum this week after firing FBI director James Comey on Tuesday. The firing comes as the FBI’s investigation of Russian interference in the 2016 election, and its possible ties to the Trump campaign, moves forward. That fact alone casts a pall of suspicion across Comey’s abrupt termination. The move has triggered a “war of words” between the Trump administration and the FBI, with one FBI official telling CNBC that Trump is “Out of control” and that “this is not going to end well for this administration”.
5. President Trump’s latest move, the firing of FBI director Comey, now puts the timing of his tax reform agenda in question. Paul Christopher, head global market strategist at Wells Fargo Investment Institute, said “There are political risks in this country [the U.S.] because of uncertainty”. Mr. Christopher continued, saying “What about political uncertainty in this country? If Trump and Congress don’t deliver tax reform or healthcare by the mid-term election, is the Republican majority in the House or Senate at risk? I would say possibly. It’s not like leaving the euro zone but there’s certainly more risk that would impact the economy going forward”. If the Republican controlled government cannot get its act together and achieve any of the items on Trump’s agenda, then Democrats could sweep into control of Congress in 2018 and the ensuing gridlock between Congress and the Office of the President would be disastrous.
6. South Korea headed to the polls this week to elect a new leader after the disgraced exit of its former president, Park Geun-hye. It is highly likely that president Trump’s remarks about South Korea in a Reuters interview last month had a direct influence on the results of the election this week. In his Reuters interview, President Trump said that he wanted South Korea to foot the bill for the Terminal High Altitude Area Defense anti-missile system that the U.S. has deployed in South Korea, and that he desires to renegotiate the current free trade agreement between the two countries. There seems to be a growing anti-U.S. sentiment in South Korea and Moon Jae-in, the incoming President and an avowed liberal, is not expected to make overt moves to smooth over any strains in the relationship between the two countries.
7. North Korea continued its belligerent rhetoric towards the U.S. this week as its ambassador to the United Kingdom told Sky News that “The U.S. cannot attack us first. If the U.S. moves an inch, then we are ready to turn to ashes any available strategic assets of the U.S.”. Ambassador Choe Il also said that the North is ready to conduct what will be its sixth nuclear test at any time Kim Jong Un decides to do so.
8. Centrist candidate Emmanuel Macron’s victory in the French elections over the weekend means, at least for the moment, that France’s continued membership in the European Union is no longer in doubt. Despite her loss, the fact that Marine Le Pen made it all the way to the final election shows just how prevalent nationalistic tendencies have become across the globe and the growing trend could spell trouble in future elections across Europe.
9. The International Monetary Fund (IMF) announced this week that there had been no decision reached on Greece’s debt. IMF spokesman William Murray said on Thursday that “discussions on the debt side of the equation have only just started, so it’s really early. Our position hasn’t changed”. Earlier this month, Greece agreed to further spending cuts in return for additional bailout funding. A condition of Athens’ agreement to cut more spending was that Greece receives some sort of measures to cut its debt load, which stands at 179% of its Gross Domestic Product (GDP). The IMF views this level of debt as unsustainable and insists that it does not desire to finance further bailouts for Greece without conditions for some sort of debt relief for the beleaguered country.
10. Crude oil edged higher this week on hopes that OPEC will choose to extend its productions caps further into the year. In the U.S., continued addition to capacity is appearing to undercut OPEC’s moves to reduce the global glut in oil. According to the weekly Baker Hughes “rig count”, the U.S. added another 9 rigs to drill for new oil, bringing the total number of operational rigs to 712, versus 318 at this same time last year.
11. The euro drifted steadily lower against the U.S. dollar this week before nearing a floor on Tuesday. The euro moved briefly higher late Tuesday, but soon returned to its lows for the week and moved basically sideways through Friday morning. A vertical move higher on Friday was not enough to push the euro back into positive territory and it appears set to close lower against the U.S. dollar for the week. The Japanese yen had a bumpier ride than the euro this week, falling steeply through Monday and then attempting to recover in a series of jagged peaks and valleys. The yen had moved back to its lows for the week by late Wednesday, but began attempting a recovery on Thursday morning that carried through to Friday. The upward moves by the yen were not enough to bring it back to positive territory for the week and it also appears set to close the week lower against the U.S. dollar.
Now that elections in France and South Korea are both complete, news will likely once again turn focus to President Trump and his apparent inability to rally enough support within the Republican Party to accomplish the items that are on his agenda. His abrupt firing of FBI director James Comey has likely put progress on his much-anticipated tax plan even further behind and if his administration continues to hit roadblocks to progress, there is a growing likelihood that Republicans face massive losses in Congress when mid-term elections come around.
In the United Kingdom, Prime Minister Theresa May’s gamble on holding so-called “snap” elections in what is a likely attempt to bolster further public support for her party appears to be paying off. If pollsters are correct, Ms. May’s Conservative Party has gained a 22-point lead over the Labour Party in the leadup to elections on June 8th. If the polls are correct, it would represent the largest lead on record for any British election survey. If Ms. May’s party can gain more parliamentary seats in the June 8 election then it would likely strengthen her negotiating powers as she and her government undertake the task of steering the U.K.’s exit from the European Union.
In South Korea, new president Moon Jae-in faces many challenges as he takes over the reins of leadership. Rampant governmental corruption, which led directly to the impeachment of ex-president Park Geun-hye, and growing tensions with North Korea are likely at the top of his list of items to address. Moon is a liberal, and appears to favor a less aggressive approach to dealing with North Korea, and with growing dissatisfaction over the U.S.’ deployment of the THAAD anti-missile system in South Korea, his leadership could lead to a cooling of the long-standing warm relationship between South Korea and the United States.
News outlets to monitor this weekend will likely be those in the United States as the fallout from President Trump’s abrupt firing of FBI director Comey continues. Mr. Trump is coming under increasing fire for what seems to be a growing trend of erratic, and often inappropriate, public responses to issues that face his presidency. In all this distraction, CNBC noted on Friday that with a growing nuclear crisis in Asia that the U.S. has yet to fill the ambassador posts in China, South Korea and Japan. The U.S. State Department’s own web site lists the posts as “vacant”. When questioned by CNBC the State Department said, in a statement, that it does have officials “serving in acting capacities” in these countries and referred any further questions on the subject to the White House, who did not immediately respond.
Savvy investors have continued to take advantage of temporary price dips in precious metals to acquire more physical product, for the purposes of diversifying their investment portfolios to avoid overexposure to what seems to be a growing bubble in stocks, ahead of further geopolitical turmoil and global uncertainty.
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)
|May 5th2017||May 12th2017||Net Change|
|Gold||$1228.30||$1228.67||(0.37) – 0.03%|
|Silver||$16.30||$16.44||0.14 + 0.86%|
|Platinum||$ 911.00||$ 919.50||8.50 + 0.93%|
|Palladium||$ 817.50||$ 809.00||(8.50) – 1.04%|
|Dow Jones||21006.94||20894.76||(112.18) – 0.53%|
Previous Year Comparison
|May. 13th 2016||May 12th 2017||Net Change|
|Gold||$1272.70||$1228.67||(44.03) – 3.46%|
|Silver||$ 17.13||$ 16.44||(0.69) – 4.03%|
|Platinum||$ 1052.00||$ 919.50||(132.50) – 12.60%|
|Palladium||$ 592.50||$ 809.00||216.50.50 + 36.54%|
|Dow Jones||17535.32||20894.76||3359.44 + 19.16%|
Here are your Short Term Support and Resistance Levels for the upcoming week.
Support 1220/1195/1170 16.15/15.90/15.50
Resistance 1240/1260/1290 16.60/16.80/17.10
Support 880/860/840 805/790/740
Resistance 930/975/995 840/855/875