The Precious Metals Week in Review
May 19th, 2017
1. This week was a rollercoaster ride in markets, primarily driven by headlines and rumors, and very little in the way of hard facts. As political uncertainty continues to grow in the U.S., market volatility should be expected to continue.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment benefits dipped by another 4,000 claims to a new level of 232,000 for the week ending May 13. The previous week’s data was unrevised. The four-week moving average of claims decreased by 2,750 to a new level of 240,750 from the previous week’s unrevised average. Continued sluggishness in the retail sector could still counter declining unemployment numbers when the Fed next meets to determine interest rates.
3. The fallout from President Trump’s firing of FBI director James Comey began in earnest this week. His move seems to have accelerated the ongoing investigation into alleged ties between his campaign and Russia. Mr. Trump is now under multiple investigations, by multiple organizations. Here is a brief run-down of the investigations Mr. Trump now faces: The aforementioned investigation by the Justice Department – now led by a special counsel – between his campaign and Russia; potentially related investigations led by the House and Senate Intelligence Committees into Russian hacking and intervention in the 2016 election; Investigations into the conduct of former National Security Adviser Michael Flynn and whether Trump attempted to obstruct the FBI’s investigation into that matter. Throughout all of this, Mr. Trump’s continued use of Twitter to publicly criticize his detractors is likely causing multiple headaches and late-night speech-writing among his White House staff as they try to mitigate the damage.
4. President Trump leaves for a five-stop trip across the Middle East and Europe on Friday, with his first stop being Saudi Arabia. From Saudi Arabia, Mr. Trump then travels to Israel, then to the Vatican to meet the pope, the NATO summit in Brussels and finally to the G7 summit in Italy. President Trump’s performance on this, his first foreign trip as the U.S. President, is crucial to restoring at least some modicum of credibility to his administration, with regard to foreign governmental opinions of the U.S.
5. In Asia, Firebrand Philippine President Rodrigo Duterte said on Friday that Chinese President Xi Jinping had warned him that there would be “war” if Manila tried to enforce an arbitration ruling and started drilling for oil in the much-disputed South China Sea. Last year the Permanent Court of Arbitration in The Hague ruled in favor of the Philippines in a dispute with China over the South China Sea. Duterte and Xi met on Monday in Beijing and Duterte’s account of the meeting is that he told Xi: “We intend to drill oil there, if it’s yours, well, that’s your view, but my view is, I can drill the oil, if there is some inside the bowels of the earth because it is ours”. Apparently, Xi’s response was “we’re friends, we don’t want to quarrel with you, we want to maintain the presence of warm relationship, but if you force the issue, we’ll go to war”.
6. Two Chinese SU-30 jets intercepted a U.S. aircraft, that is to used detect radiation, during a “routine mission” in international airspace over the East China Sea. The U.S. military described the incident as “unprofessional” and Air Force Spokeswoman Lt. Colonel Lori Hodge said “The issue is being addressed with China through appropriate diplomatic and military channels”. Ms. Hodge continued, saying that the U.S.’ characterization of the incident was “due to the maneuvers by the Chinese pilot(s), as well as the speeds and proximity of both aircraft”. The U.S. regularly deploys radiation sniffing aircraft
7. North Korea test launched yet another missile over the weekend and this latest launch raised concerns over that country’s rapidly accelerating nuclear and ballistic missile programs, in direct defiance of international sanctions. The North’s official news outlet, the Korean Central News Agency, described the missile as a “Hwasong-12” that was “capable of carrying a large, heavy nuclear warhead”. The rocket, described by the KCNA as “newly designed in a Korean-style” flew 490 miles and reached a maximum altitude of 1,310 miles. Japanese officials confirmed on Sunday that the missile flew for half an hour and reached an “unusually high” altitude before landing in the Sea of Japan. In South Korea, senior presidential secretary Yoon Young-chan said “The president expressed deep regret over the fact that this reckless provocation…occurred just days after a new government was launched in South Korea. The president said we are leaving open the possibility of dialogue with North Korea, but we should sternly deal with a provocation to prevent North Korea from miscalculating”. The White House, in a statement regarding the latest launch, said that North Korea has been “a flagrant menace for far too long”.
8. In China, the state-run Defense Times newspaper said on Tuesday that Norinco CS/AR-1 55mm anti-frogman rocket launcher defense systems had been installed on Fiery Cross Reef in the disputed Spratly Islands. Fiery Cross Reef is administered by China, but the Philippines, Vietnam and Taiwan all have laid claim to the territory as well. The CS/AR-1 system is designed to neutralize enemy combat divers and was deployed in response to relatively recent operations by Vietnamese divers in the Paracels.
9. Crude oil topped $50-a-barrel this week as further news emerged that OPEC members may be considering deeper production cuts to try to eliminate the persistent oversupply of crude in the global marketplace. U.S. oil rig counts added 8 additional rigs this week, marking a 420-rig gain over this time last year.
10. The euro drifted higher nearly the entire week against the U.S. dollar as political uncertainty in the U.S. forced the dollar lower against other global currencies. On Thursday, the euro saw a slight reversal as news headlines indicated a video “might” exist which could ease some of the political pressure on Trump over his firing of FBI director Comey. As the market absorbed and analyzed the headlines, the euro reversed again and moved to its highs for the week. The euro will close the week higher against the U.S. dollar. The Japanese yen also gained for the week over the U.S. dollar. The yen seemed to hit a plateau by Thursday morning, and moved essentially sideways through Friday, but will still close the week higher against the U.S. dollar.
The Primary driver for market volatility will likely continue to be political unrest in the United States. President Trump and his entire administration is coming under increasing pressure because of his actions in, and the circumstances surrounding, the firing of FBI director James Comey. Whispers of the word “impeachment” are already circulating, even as the President leaves for a 9-day trip abroad to meet with other world leaders. Former FBI Director Robert Mueller has been appointed as a “special counsel” to head up the investigation into the alleged Russian ties to the Trump campaign.
North Korea appears to be making more progress on their missile program than previously expected, after last weekend’s launch of a new type of missile seems to prove out. The North’s state-run news agency, KCNA, claims the missile is a “new ground-to-ground medium long-range strategic ballistic rocket” with the capability of “carrying a large, heavy nuclear warhead”. Despite the longer range the most recent projectile displayed, the U.S. Pacific Command said that Sunday’s test flight was “not consistent with an intercontinental ballistic missile”. North Korea’s blatant defiance of the United Nations ban on their continued pursuit of a nuclear arsenal is raising tensions across the Asian region.
On Friday, Defense Secretary Jim “Mad Dog” Mattis said that if North Korea escalates the situation to a military level, it would be “tragic on an unbelievable scale”. General Mattis said “We are going to continue to work the issue. If this goes to a military solution, it’s going to be tragic on an unbelievable scale. So, our effort is to work with the U.N., work with China, work with Japan, work with South Korea to try to find a way out of this situation”. Russian President Vladimir Putin said on Monday “I want to confirm that we are categorically against the expansion of the club of nuclear powers, including with the Korean Peninsula and North Korea. But at the same time, we understand that what we have observed in the world recently, and specifically flagrant violations of international law and incursions into the territory of foreign states, changes in regime, lead to such kinds of arms races”.
The comment seemed to be veiled criticism of the U.S. for past military operations in Iraq, Libya and Syria. Putin continued, saying “we need to return to dialogue with North Korea and stop scaring it and find ways to resolve these problems peacefully. If you recall, there was a time when North Korea announced it was suspending this kind of [nuclear] program, but unfortunately certain participants in the negotiations process did not have enough patience. I think we need to return to this”.
As usual, it will be vital to pay attention to global news sources for events that could negatively impact stocks while simultaneously sending prices for precious metals higher. Savvy investors continue to use temporary price dips in precious metals to acquire additional physical precious metals, at discounts, as part of a plan for a well-diversified investment portfolio. The sudden drop in stocks on Wednesday shows just how fickle that sector can be to a sudden surge in political unrest. As the investigations into the Trump administration proceed ahead, there could be further destabilizing news headlines which could trigger a sudden rush into precious metals once more as a “safe haven” in times of uncertainty. If demand for physical precious metals suddenly skyrockets, then prices could experience drastic and rapid swings to the upside in a relatively short time that could leave the unprepared investor stunned.
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 12th 2017||May 19th 2017||Net Change|
|Gold||$1228.67||$1255.30||26.63 + 2.17%|
|Silver||$16.44||$16.84||0.40 + 2.43%|
|Platinum||$919.50||$945.00||25.50 + 2.77%|
|Palladium||$809.00||$762.50||(46.50) – 5.75%|
|Dow Jones||20894.76||20804.84||(89.92) – 0.43%|
Previous Year Comparison
|May. 20th2016||May 19th2017||Net Change|
|Gold||$1252.90||$1255.30||2.40 + 0.19%|
|Silver||$16.53||$16.84||0.31 + 1.88%|
|Platinum||$ 1023.50||$ 945.00||(78.50) – 7.67%|
|Palladium||$559.00||$762.50||203.50 + 36.40%|
|Dow Jones||17500.94||20804.84||3303.90 + 18.88%|
Here are your Short Term Support and Resistance Levels for the upcoming week
Support 1240/1220/1195 16.80/16.60/16.15
Resistance 1260/1290/1320 17.10/17.35/17.75
Support 930/880/860 750/735/710
Resistance 958/975/995 770/790/810