The Precious Metals Week in Review
May 26th, 2017
1. This week saw support return for precious metals as geopolitical tensions continued to create uncertainty across the globe.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment benefits jumped by 1,000 claims to a new level of 234,000 for the week ending May 20. The previous week’s data was revised higher by 1,000 claims. The four-week moving average of claims decreased by 5,750 to a new level of 235,250 from the previous week’s revised average. That reading is the lowest level for the four-week moving average of claims since April 14, 1973. Next week will see the release of the May Non-Farm Payrolls report and economists will be heavily viewing that data for indications on the Federal Reserve’s true resolve to conduct another interest rate hike in June.
3. U.S. economic growth in the first quarter was revised higher, according to new government data released this week. The new figure of 1.2 percent annual growth was clearly better than the original report of 0.7 percent, but remains the weakest performance for the U.S. economy since the first quarter of 2016. Economists feel that the poor performance is not a true picture of the state of the U.S. economy and is more likely due to errors in the governmental calculations that typically show up during Q1. The U.S. government has apparently acknowledged that there tend to be frequent aberrations in the first quarter data and claims to be working to address the issue for future measurements.
4. President Trump’s first foreign trip has, like most of his fledgling presidency, been plagued with media reports of blunders and pitfalls. As Mr. Trump arrived in Brussels to visit NATO’s new headquarters, thousands of citizens reportedly took to the streets in protest. Reports surfaced in the German publication Der Spiegel on Friday that Mr. Trump had criticized Germany’s trade surplus with the U.S., supposedly saying “The Germans are bad, very bad. See the millions of cars they sell in the U.S., terrible. We will stop this”. European Commission President Jean-Claude Juncker, who was supposedly present when the comments were made, dismissed the Der Spiegel report, calling it “exaggerated”. This weekend the President will finish the final leg of his trip as he attends the G7 summit in Sicily and returns to the U.S.
5. In Asia, North Korea fired yet another ballistic missile into the waters off its east coast over the weekend. The launch was the second such launch since South Korea’s new president, who ran on a platform of a more moderate approach to North Korea, took office. The projectile traveled nearly 310 miles, landing outside of Japan’s exclusive economic zone. No damage to ships or aircraft were reported following the incident. On Saturday, the North’s state news agency, KCNA, said in a commentary that “The U.S. mainland and the Pacific operational theatre are within the strike range of the DPRK and the DPRK has all kinds of powerful means for annihilating retaliatory strike”. On Monday, KCNA said that Kim Jong Un had personally supervised the latest test and that he said “with pride that the missile’s rate of hits is very accurate and Pukguksong-2 is a successful strategic weapon, he [Kim Jong Un] approved the deployment of this weapon system for action”.
6. On Tuesday, South Korea fired warning shots at an “unidentified object” that was flying over the border from North Korea. An anonymous military official told Reuters that “the military was trying to analyze what the object was”. The Yonhap News Agency reported that nearly 90 machine gun shots were fired at the object and that, while its identity remained unclear, it was “possibly a drone”.
7. In further news related to North Korea, the U.S. apparently intends to test an anti-ballistic missile defense system next week that will, for the first time, attempt to target an intercontinental-range missile. With each successful missile test, North Korea’s anti-U.S. rhetoric increases, with threats that they can strike the U.S. mainland with their missiles “at-will” growing more pronounced each time.
8. Moody’s downgraded China’s credit rating to an A1 from AA3 amid growing concerns over the country’s debt levels. This is apparently the first time in 25 years that a ratings agency has downgraded China. Macquarie, in a research note, said “This news is a clear China negative in our view (even though the rationale for the downgrade contained nothing new). The next question is whether S&P will follow Moody’s. S&P has had China on outlook negative since February 2016, indicating there is a potential downgrade brewing. But S&P currently rates China one notch above Moody’s and Fitch, so a cut would not break new ground”. Mei Xinya, a researcher at China’s Ministry of Commerce classified Moody’s move as “illogical” and noted that the calculations used “overestimated the difficulties faced by the Chinese economy”.
9. In Europe, the U.K. was the victim of a terrorist attack as a suicide bomber killed at least 22 people and injured many more in a concert hall that was crowded mostly with children and young adults. Thus far, U.K. police have arrested at least 8 individuals in connection with the attack and Prime Minister Theresa May raised the country’s threat level to “Critical” meaning that the government believes there may be a threat of another attack. The Islamic State immediately claimed responsibility for this latest attack, as it often does when the news breaks of such things.
10. The U.K. was furious with U.S.-based intelligence agencies as sensitive data related to the investigation, including the suspected attacker’s name, was leaked to the American press mid-week. President Trump, in a statement released in Brussels on Thursday, addressed the intelligence leak, saying “The alleged leaks coming out of government agencies are deeply troubling. I am asking the Department of Justice and other relevant agencies to launch a complete review of this matter, and if appropriate, the culprit should be prosecuted to the fullest extent of the law”. The U.K. temporarily banned the sharing of its intelligence with U.S. agencies in the wake of the leak, but had reportedly resumed its information sharing program by Friday.
11. Crude oil plunged on Thursday despite an announcement from OPEC that it would extend its production cuts. OPEC agreed in Vienna this week to extend production cuts to 1.8 million barrels per day through the first quarter of 2018, but analysts were hoping for deeper cuts and believe that the extension does not go far enough to significantly trim global oil supplies in support of higher prices. Ongoing increases in American oil rig counts and Shale Oil production have been working to offset OPEC’s capacity cuts, extending the global oil glut.
12. The Euro dropped against the U.S. Dollar at the start of the week, but then surged vertically higher during Monday’s trading. By late Tuesday the euro had dropped back near its lows, ahead of the Federal Reserve’s release of its latest meeting minutes. Following the release of the minutes on Wednesday, the euro surged higher again and then began drifting back towards its lows through Friday’s trading. The euro will close the week slightly lower against the U.S. dollar. The yen saw choppy trading this week, dropping at the open and then drifting higher in a series of small surges. By late Tuesday, the yen had dropped sharply and it continued lower through late Wednesday. After the release of the Fed minutes, the yen staged a small recovery, and Friday’s trading saw the yen move back to its highs for the week. A small correction late on Friday means the yen will likely close the week even, or slightly lower, against the U.S. dollar.
Next week will be a shortened trading week as the U.S. observes the Memorial Day holiday on Monday to honor those Americans who have lost their lives in military service. Memorial Day typically kicks off the unofficial start of the “summer vacation season” so even after trading resumes in the U.S. on Tuesday, volumes may be light.
North Korea will continue to need close watching over the weekend as they have now conducted two successful missile tests on consecutive weekends. If North Korea conducts a third successful test over this weekend, it will likely significantly increase tensions across the Korean Peninsula and the Asian region as a whole. Historically the North has had long lead times in between missile tests, and many of those tests have failed at the time of, or shortly after, launch. Two successful tests in a row, without immediate reprisals from the United Nations, could embolden North Korea to conduct further missile tests or even carry out another nuclear test in direct defiance of international pressure and the harsh sanctions that have resulted from their continued pursuit of a nuclear arsenal. The U.S., as North Korea increases the frequency of its missile tests, now reportedly plans to carry out the first test of an anti-missile defense system which will actually target an intercontinental ballistic missile for the first time. Such a test is sure to raise the level of rhetoric coming out of North Korea even further.
In Europe, the United Kingdom remains at a heightened alert level after a terrorist attack in Manchester earlier in the week killed at least 22 people and left others with serious injuries. U.K. police say that they have “arrested the key players” in the attack and have at least 8 individuals in custody. The threat level in the U.K. remains at “critical” as police forces scramble to ascertain whether more such attacks are in the planning stages.
Elsewhere in Europe, Greece and its European creditors continue to be at odds on how to solve Athens’ massive debt problem. Greece owes roughly 8 billion euros to its creditors in July and without an agreement over its progress in carrying out reforms to reduce those debt levels, Athens cannot receive further disbursements from its most recent bailout program. In other words, Greece must borrow money in order to be able to pay back the money it previously borrowed. Greece is on its third “bailout” since 2010, and each one has had harsher and harsher austerity measures tied to it and those measures have increasingly angered the population and sent unemployment skyrocketing. Even so, the International Monetary Fund noted, in a blog post dated February 7th, that for “Greece to return to sustainable growth and exit successfully from official financing, it needs to deepen and accelerate reforms.”
As always, given today’s global geopolitical uncertainty, it remains important to monitor global news outlets throughout the weekend for unexpected events which could affect world markets. Monday’s holiday observance in the U.S. means that reactions in the U.S. market to any breaking news over the weekend will be delayed. Savvy investors continue to acquire physical precious metals as part of a well-diversified investment portfolio whenever buying opportunities allow them to do so at an effective discount.
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 19th2017||May 26th2017||Net Change|
|Gold||$1255.30||$1268.58||13.28 + 1.06%|
|Silver||$16.84||$17.35||0.51 + 3.03%|
|Platinum||$945.00||$963.00||18.00 + 1.90%|
|Palladium||$762.50||$792.50||30.00 + 3.93%|
|Dow Jones||20804.84||21080.28||275.44 + 1.32%|
Previous Year Comparison
|May. 27th 2016||May 26th 2017||Net Change|
|Gold||$1216.70||$1268.58||51.88 + 4.26%|
|Silver||$ 16.27||$ 17.35||1.08 + 6.64%|
|Platinum||$ 982.00||$ 963.00||(19.00) – 1.93%|
|Palladium||$ 539.00||$ 792.50||253.50 + 47.03%|
|Dow Jones||17873.22||21080.28||3207.66 + 17.94%|
Here are your Short Term Support and Resistance Levels for the upcoming week
Support 1240/1220/1195 17.10/16.80/16.60
Resistance 1270/1295/1320 17.40/17.75/18.00
Support 950/930/880 770/750/735
Resistance 975/995/1025 800/825/860