The Precious Metals Week in Review

June 9th,2017

1. U.S. news outlets were dominated this week by the Congressional hearings of former FBI director James Comey and the events surrounding his dismissal by President Trump. Next week will witness the next Federal Open Market Committee meeting to set monetary policy and govern interest rates. There will also be a slew of U.S. economic data which could give further insight into what seems to be a flagging U.S. economy.


Week in Review – June 9th, 2017

2. The seasonally adjusted number of Americans filing initial claims for state unemployment benefits appeared to plunge by 10,000 claims to a new level of 245,000 for the week ending June 3. The previous week’s data was revised higher however, by 7,000 claims so despite the positive spin media outlets put on the number, the net change was a decrease of only 3,000. The four-week moving average of claims also increased by 2,250 to a new level of 242,000 from the previous week’s average, which was also revised higher by 1,750.

3. As Former FBI director James Comey began his testimony before Congress this week, the “bombshell” revelations against President Trump that everyone appeared to be expecting never seemed to surface. If anything, Mr. Comey did more to tarnish his own reputation instead of Mr. Trump’s when he confirmed that President Trump did not specifically order him to drop his investigation and also announced that he himself was directly responsible for leaking his controversial memo regarding his conversations with President Trump to the press.

4. In the United Kingdom, Prime Minister Theresa May’s call for snap elections essentially backfired on her on Thursday. After the final results were in, Ms. May and her Conservative Party lost their 17-seat majority in parliament. None of the major political parties in the U.K were able to gain an overall majority and Ms. May sought the Queen’s permission on Friday to enter parliament together with the Democratic Unionist Party from Northern Ireland. There were multiple calls for Theresa May’s resignation, but she seems resolute on forming a weak coalition government and remaining on as Prime Minister to see out the Brexit negotiation process. Should Ms. May be forced out of her position as Prime Minister then the U.K.’s alliance with the U.S. could face its own challenges, depending on who comes in as her replacement.

5. The European Central Bank (ECB) announced that it would keep interest rates unchanged this week. ECB President Mario Draghi said at a press conference following the bank’s decision that interest rates were likely to remain where they are for “an extended period of time” due to lower inflation expectations across the Eurozone over the next 2 years. Mr. Draghi also said that there had been no discussion of tapering off the ECB’s massive bond purchasing program known as “quantitative easing”, noting that inflation appeared to be easing some.

6. North Korea continued its defiant quest to increase its missile capabilities this week, in spite of UN Security Council resolutions banning their programs and multiple rounds of sanctions. The North fired what appeared to be several cruise missiles from its east coast on Thursday. South Korea’s military said “North Korea launched multiple projectiles that appear to be short-range land-to-ship cruise missiles [this] morning off [its] east coast from the region of Wonsan.” The isolated country has conducted weapons systems tests at an ever-increasing pace of late, ramping up the rhetoric aimed at the United States each time one of their tests succeeds.

7. Japan said on Thursday that its first quarter Gross Domestic Product (GDP) came in with just a 0.3 percent gain, on quarter, and grew at just a 1 percent rate on an annual basis. The year-on-year figure was revised down from an initial estimate of 2.2 percent growth. In a Reuters poll, analysts expected quarterly figures to be up 0.6 percent and to see an annual growth rate of 2.4 percent, so the official data was much weaker than expected. Despite the weaker data, Japan’s cabinet office said it maintains its view that the Japanese economy is in a moderate recovery.

8. Last week’s successful interceptor missile defense test by the U.S. has ruffled feathers in both China and Russia and apparently only served to increase the rhetoric out of North Korea. The US currently has its ground-based interceptor system installed in California and Alaska and has nearly fully deployed its Terminal High Altitude Area Defense system in South Korea. Russian President Vladimir Putin said, following the last week’s successful test, “This destroys the strategic balance in the world. What is happening is a very serious and alarming process. In Alaska, and now in South Korea, elements of the anti-missile defense system are emerging. Should we just stand idly by and watch this? Of course not. We are thinking about how to respond to these challenges. This is a challenge for us.” China appears to concur with Russia, with an op-ed piece on the Chinese military’s official web portal saying this week that “The enhancement of America’s missile defense capability will, in theory, undermine the effectiveness [and] efficacy of nuclear strikes launched by its main strategic rivals, thus consolidating its own domination.”

9. Just a week after Britain lowered its threat level to “severe” in the wake of the Manchester terror attack, another attack was carried out on the London Bridge on Saturday. Three attackers, wearing apparently fake explosive vests, rammed their vehicle into pedestrian traffic on the bridge before exiting the vehicle to carry out knife attacks on other innocent bystanders. The recent spate of terror attacks in the U.K. likely had at least some impact on the elections on Thursday as the U.K. populace began questioning Prime Minister May’s ability to keep the country safe.

10. Tensions in the Middle East surged to new levels again after five Arab countries broke ties with Qatar under accusations that it supports the Muslim Brotherhood, ISIS and Al-Qaeda. The government of Qatar has soundly rejected these accusations, but on Friday dozens of individuals with links to Qatar had been placed on blacklists. Turkey, Qatar’s ally, was reportedly mobilizing troops, warships and aircraft to send to the region as the blockade against the tiny nation continued.

11. Crude oil prices resumed their slide this week, dropping into the mid-to-upper $40 range as U.S. data showed a massive 3.3-million-barrel build up in crude inventories. The data, along with a seemingly ever-increasing rig count in the U.S. seems to show that the supply glut in oil appears set to continue despite OPEC’s production cuts and their stated desire to support higher prices.

12. The euro spent much of the week moving essentially sideways in a tight range. Following the ECB’s monetary policy meeting the euro took a vertical plunge, then quickly recovered and spent the rest of the week drifting steadily lower. The euro will close the week out lower against the U.S. dollar. The Japanese yen drifted sideways at the open, then moved vertically higher early on Tuesday. The yen had peaked by Wednesday and began drifting steadily back to the downside from there. A slight bump at the close on Friday will ensure the yen closes even, or slightly to the upside, against the dollar for the week.

It has been a week of turmoil as the Congressional hearings of former FBI director James Comey got underway on the very day that elections in the United Kingdom were held. Many media outlets were expecting former Director Comey to reveal some “bombshells” that could result in further political hardship for President Trump, but during the public portion of his testimony, such items never appeared.

In the United Kingdom (UK), Prime Minister Theresa May’s gamble to hold snap elections to try to secure a larger majority in parliament completely backfired. Not only did she not gain a larger majority, she cost her Conservative Party the existing 17 seat majority that they previously held. The result is a “hung parliament” and a weaker UK government just as the crucial exit negotiations between the UK and the European Union are set to get underway in earnest. Consecutive terror attacks in Britain may have been a contributing factor to her party’s drop in the polls as citizens began to question the ability of the incumbent Conservative Party to keep their country safe. Amid calls for her resignation after the election, Theresa May has vowed to form a coalition government with Northern Ireland’s Democratic Unionist Party to govern the country and lead it through its “Brexit”. A hung parliament, one with no clear majority on any side, usually means that passing any new legislation becomes exceedingly difficult. The Brexit process will surely require such new legislation and so the U.K.’s smooth exit from the EU has now likely become even more difficult.

In Asia, North Korea continued to annoy its neighbors as it carried out yet another test of a weapons system involving missiles this week.

Elsewhere in Asia, both China and Russia have expressed their severe displeasure over the U.S.’ pursuit of its anti-missile defense system. North Korea didn’t miss the chance to put its own spin on the U.S.’ recent successful test of its interceptors as KCNA, the official state-run news agency for North Korea said that the U.S. is “sadly mistaken if they think such missile interception system can prevent the shower of [a] nuclear strike”. 

In the Middle East, tensions have sharply escalated as Saudi Arabia and its allies effectively blockaded Qatar, ostensibly on the grounds that the tiny nation directly funds terrorism. Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain all formally cut ties with Qatar on Monday, withdrawing their diplomatic staff and making moves to cut off land, sea and air travel to the tiny, but strategically important, nation. Saudi Arabia’s decision to close the only land border that Qatar shares with other nations sparked runs on grocery stores as Qatari citizens feared a disruption in their supplies of food.

Even though political turmoil in the U.S. appears to be on the back burner for the moment, it remains vital to monitor global news outlets over the weekend for news items that could further affect precious metals prices. Further escalation in the Middle East, or additional missile or nuclear tests by North Korea could both be pivotal factors in determining the level of uncertainty as markets open in Asia on Sunday night.

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)

June 2nd2017 June 9th2017 Net Change
Gold $1278.14 $1269.76 (8.38) – 0.66%
Silver $17.57 $17.27 (0.30) – 1.71%
Platinum $955.00 $942.50 (12.50) – 1.31%
Palladium $843.00 $862.70 19.70 + 2.34%
Dow Jones 21206.29 21271.97 65.68 + 0.31%

Previous Year Comparison

June 10th2016 June 9th2017 Net Change
Gold $1275.90 $ 1269.76 (6.14) – 0.48%
Silver $   17.33 $   17.27 (0.06) – 0.35%
Platinum $ 994.00 $ 942.50  (51.50) – 5.18%
Palladium $ 546.00 $ 862.70 316.70 + 58.00%
Dow Jones 17865.34 21271.97 3406.63 + 19.07%

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

                                             Gold                            Silver

Support                       1265/1245/1230           17.10/16.80/16.60

Resistance                   1295/1310/1350           17.40/17.75/18.00

                                      Platinum                    Palladium

Support                       930/900/885               825/800/770

Resistance                   950/975/995               850/880/910

This is not a solicitation to purchase or sell.
© 2017, Precious Metals International, Ltd.

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