The Precious Metals Week in Review
1. It was a busy week for news as the fallout from President Trump’s firing of former FBI director James Comey continued to play out in the media. The U.S. Federal Reserve also held its Federal Open Market Committee meeting, and a slew of data for the U.S. economy was released.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 8,000 claims for the week ending June 10. The previous week’s data was unrevised. The four-week moving average of claims increased by 1,000 to a new level of 243,000 from the previous week’s unrevised average. Poor economic data in the retail and housing sector could be signaling that corporations might be holding off on hiring, or even looking to downsize further in the face of flagging sales.
3. Retail sales data in the U.S. this week was abysmal, on a relative basis. Analysts had projected that retail sales would grow by 0.1% but instead they experienced a 0.3% decline. The Consumer Price Index for May also came in weaker than expected, indicating that inflation in the U.S. is still not on track to hit the Federal Reserve’s 2 percent target. Amazon’s announcement on Friday that it was purchasing grocery chain Whole Foods sent retail grocery stocks into a frenzy of downward spirals as analysts began predicting the death of the retail grocery outlet at Amazon’s hands.
4. The Federal Reserve held its Federal Open Market Committee meeting to set monetary policy this week and followed through on their desire to conduct another interest rate increase. The Fed raised interest rates another quarter point on Wednesday and hinted that it may begin formulating a plan to reduce the size of its massive $4.5 trillion balance sheet as well. Peter Boockvar, chief market analyst at The Lindsey Group, said after Janet Yellen’s press conference that “They desperately want this to be an easy, smooth, paint-drying type of process, but there’s no chance. The whole purpose of quantitative easing was to inflame the markets higher. Why shouldn’t the reverse happen when we do quantitative tightening?” Mr. Boockvar continued with his comments, saying “Since World War II we’ve had 13 rate-hike cycles: 10 put us into recession. To think that there’s some sort of free lunch where they can normalize and let the balance sheet roll off and everything will be fine and dandy, I think there’s some delusion to that”. Ms. Yellen said, at her press conference after the meeting: “This [the unwinding of the balance sheet] will just be something that quietly runs in the background. That’s my expectation and our intention. Of course, if it turns out there is a surprise, a substantial reaction, that is something that we would have to take into account when deciding the appropriate stance of policy”.
5. On Friday, President Trump appeared to confirm that he is under investigation in a tweet that said “I am being investigated for firing the FBI Director by the man who told me to fire the FBI Director! Witch Hunt”. The tweet appears to be aimed at Deputy Attorney General Rod Rosenstein, who criticized James Comey’s conduct in a letter to the president and recommended a change in FBI leadership back in May. Mr. Trump’s tweet seems to imply he is under investigation for firing Comey while it may be entirely possible, in fact highly likely, that he is actually under a broader investigation for attempted obstruction of justice.
6. After Prime Minister Theresa May’s failed attempt to bolster her majority in parliament failed last week, Christine Lagarde, Managing Director of the International Monetary Fund (IMF) warned against carrying out a “crash” Brexit. Negotiations begin next week on the U.K.’s exit from the European Union and there is a great deal of uncertainty over what the end result of the process will mean for Britain’s legendary finance sector. Uncertainty continues to surround the fate of the U.K. finance sector, post-Brexit. Luxembourg’s ex-finance minister Luc Frieden said “We need a strong partnership with the United Kingdom, it’s our neighbor and it’s going to remain an important financial services center. Yet at the same time, ‘out’ is not ‘in’ and therefore I think the United Kingdom must know that it’s not going to benefit anymore over the passporting rights it used to have. So, with those two pillars, I think in between a deal can be found but it will be very difficult and it will take a lot of time”. Mr. Luc told CNBC that he also anticipated that the near 18 months remaining in the negotiation time was “wholly unrealistic” to accomplish the task.
7. The Bank of Japan (BoJ) chose to keep monetary policy steady this week in the wake of the U.S. Federal Reserve’s decision to raise their rates. The BoJ also pledged to keep its asset purchases near the current 80 trillion yen ($727 million) levels for the near-term. The central bank raised its assessment of the Japanese economy and increased its forecast for real Gross Domestic Product growth to 1.6 percent for the 2017-2018 fiscal year. The BoJ did however, lower its expectations for its core Consumer Price Index from a growth rate of 1.5 percent down to 1.4 percent for the same time period.
8. U.S. Defense Secretary Jim Mattis, in a written statement to Congress’ House Armed Services Committee this week, said “The [North Korean] regime’s nuclear weapons program is a clear and present danger to all, and the regime’s provocative actions, manifestly illegal under international law, have not abated despite United Nations’ censure and sanctions. The most urgent and dangerous threat to peace and security is North Korea. North Korea’s continued pursuit of nuclear weapons and the means to deliver them has increased in pace and scope”.
9. Crude oil prices were up just off of the lows for 2017 this week as the Baker Hughes rig count in the U.S. showed a 22nd week of gains. Oil prices remained below $50 on continued fears that the global supply glut shows no signs of abating, despite OPEC’s extension of cuts.
10. The euro drifted essentially sideways against the U.S. dollar for most of the week, seeing a sharp climb with a matching and immediate reversal on Wednesday after the Federal Reserve announced its interest rate hike. By Thursday the euro had begun declining against the U.S. dollar but the drop soon reversed itself on Friday. The euro appears set to close the week out almost exactly even with the dollar. The Japanese yen drifted higher at the start of the week and began moving basically sideways through Wednesday, when the Federal Reserve’s rate hike also sent that currency moving higher. The yen began a slow drift back lower following the rate hike and appears set to close the week out slightly lower against the dollar.
“For the economic climate, the present situation is…mid-term scary. I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.” Those are the words of Bernard Arnault, who made that statement to CNBC on Thursday. Mr. Arnault is the chief executive of LVMH, the world’s largest luxury goods company. Mr. Arnault continued, saying “There has not been a big crisis for almost ten years now and since I’ve had a business I have seen crises more than every ten years, so be careful”.
In Europe, the International Monetary Fund united with eurozone finance ministers on Thursday in saying that it will join the Greek bailout program “in principle”, but said any disbursement of funds would only happen after further details on debt relief for the beleaguered nation were revealed. The IMF has long held that Greece’s debt levels, after it required a third bailout from the rest of Europe, were unsustainable and required restructuring. Much of the rest of Europe, Germany in particular, does not agree with such a plan. Following the IMF’s announcement, the rest of Athens’ international creditors opted to extend a credit “lifeline” to Greece worth approximately $9.5 billion (US) so that it can avoid defaulting on its payments that are due next month.
North Korea was relatively quiet for the past week, actually making news for releasing an American prisoner (albeit in extraordinarily poor health) instead of firing off yet another missile or conducting tests of some other weapons system. Despite the relative calm, US Defense Secretary Mattis still told the US Congress this week that North Korea was “The most urgent and dangerous threat to peace and security” and warned that its increasing pace of apparent success with its outlawed missile program was a growing crisis. Also in Congress this week, the US Senate passed a sweeping new sanctions bill that targets both Iran and Russia and apparently introduces limits on the President’s ability to overturn any existing sanctions. The bill still has to pass through the House of Representatives, but tying new sanctions on Iran into the same bill as additional sanctions on Russia will likely complicate the already greatly strained relationship between the U.S. and Russia even further.
President Trump is apparently in favor of additional sanctions on Iran, but against new sanctions on Russia. As the investigations into the Trump campaign’s supposed ties to Russia and the circumstances surrounding former FBI Director Comey’s firing continue, President Trump’s legislative agenda is in greater and greater danger of being derailed by the fallout.
As global uncertainty continues to grow, savvy investors continue to take steps to diversify their portfolios away from over-exposure to any single asset class, particularly any class that appears to be skyrocketing into “bubble” territory. These investors continue to take advantage of the buying opportunities presented by temporary price dips in precious metals to acquire more physical product for their portfolios.
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)
|June 9th2017||June 16th2017||Net Change|
|Gold||$1269.76||$1254.75||(15.01) – 1.18%|
|Silver||$17.27||$16.72||(0.55) – 3.18%|
|Platinum||$942.50||$929.50||(13.00) – 1.38%|
|Palladium||$862.70||$878.00||15.30 + 1.77%|
|Dow Jones||21271.97||21384.28||1112.31 + 0.53%|
Previous Year Comparison
|June 17th2016||June 16th2017||Net Change|
|Gold||$1294.80||$1254.75||(40.05) – 3.09%|
|Silver||$17.41||$16.72||(0.69) – 3.96%|
|Platinum||$966.00||$929.50||(36.50) – 3.78%|
|Palladium||$529.50||$878.00||348.50 + 65.82%|
|Dow Jones||17675.16||21384.28||3709.12 + 20.98%|
Here are your Short Term Support and Resistance Levels for the upcoming week
Support 1245/1230/1200 16.60/16.40/16.20
Resistance 1270/1300/1320 16.90/17.10/17.40
Support 925/900/885 850/825/800
Resistance 950/975/995 880/900/920