The Precious Metals Week in Review
1. It was a volatile week for precious metals as geopolitical tensions eased somewhat and U.S. Federal Reserve officials continued to remark publicly on future interest rate hikes.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment increased by 3,000 claims for the week ending June 17. The previous week’s data was revised higher by 1,000 claims. The four-week moving average of claims increased by 1,500 to a new level of 244,750 from the previous week’s revised average. The previous week’s moving average was revised higher by 250 claims.
3. Ethereum, one of the newer blockchain-based cryptocurrencies similar to Bitcoin, proved just how volatile such markets can be when it “flash crashed” from $319 to just $0.10 in only seconds on one of its exchanges on Wednesday. Apparently a “multimillion dollar” sell order that was placed on the GDAX exchange for the cryptocurrency triggered a series of stop-loss orders that led to the dramatic plunge and GDAX is currently investigating the chain of events. Trading was halted, and it remains to be seen if GDAX will “back out” the orders that went through when the cryptocurrency was at a mere $0.10.
4. The U.S. Federal Reserve, which has faced heavy criticism for years that it has not been aggressive enough in implementing interest rate normalization, is now facing criticism that it is moving too fast in raising rates. Joachim Fels, global advisor at Pimco, said that the Fed should not be making moves to tighten monetary policy with evidence that inflation is well below its target of 2 percent. In a blog post for Pimco, Mr. Fels said “The prize of opportunistic tightening comes at a price: By hiking rates and starting balance-sheet runoff when inflation keeps undershooting, the Fed risks cementing inflation expectations firmly below target”.
5. St. Louis Fed President James Bullard apparently agrees with Pimco’s Joachim Fels, saying that the Federal Reserve should wait on any further rate increases until it is clear that inflation is reliably heading to the 2 percent target. At an Illinois Bankers Association conference, Mr. Bullard said “recent inflation data have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target. The Fed can wait and see how the economy develops before making any further adjustments to the policy rate”.
6. On Thursday, President Trump finally confirmed that he did not record his conversations with former Federal Bureau of Investigation director James Comey. Mr. Trump also did not however, preclude that recordings might exist which he himself did not create. In a tweet released Thursday morning, Mr. Trump said “With all of the recently reported electronic surveillance, intercepts, unmasking and illegal leaking of information, I have no idea whether there are ‘tapes’ or recordings of my conversations with James Comey, but I did not make, and do not have, any such recordings”.
7. South Korea’s military confirmed on Wednesday that a drone that crashed and was recovered on a mountain near the Demilitarized Zone earlier this month was indeed from North Korea. The drone was found equipped with a camera that contained aerial photographs of the site of a U.S.-made anti-missile defense system in one of South Korea’s southern regions. South Korea’s military described the find as a “grave provocation” which was in violation of the Korean War armistice.
8. Japan reportedly informed its public about a missile defense drill on Wednesday in what Air Self Defense Force major Akinori Hanada said was “a way to reassure people about their safety and bring peace of mind” over the threat of North Korea’s growing missile and nuclear ambitions. The drill involved a PAC-3 Patriot battery that deployed at an air base and raised its anti-missile armaments to firing position. Japan is also reported to be following the drills with a series of 30-second public information broadcasts and newspaper ads, that were supposed to begin on Friday, advising people what to do in the event of a North Korean missile attack. Japan has also begun a $1 billion program to upgrade its PAC-3 Patriot missile defense systems to extend their current 9-mile range and improve their accuracy, but the improvements are not likely to be ready until 2020.
9. Reuters reported on Thursday that North Korea has apparently carried out another engine test that the United States believes could be a key part of their program to develop an Intercontinental Ballistic Missile (ICBM). A U.S. official, speaking on condition of anonymity, said that the latest test appeared to have been what could be the smallest stage of an ICBM rocket. A second anonymous official confirmed the test to Reuters, but would not go into details on the type of rocket engine tested or whether it could be part of the North’s ICBM program.
10. Saudi Arabia, Egypt, the United Arab Emirates and Bahrain have given Qatar 10 days to comply with a steep list of demands, including paying compensation of an unspecified amount, to end the ongoing blockade that began earlier this month. The list, containing 13 points, was presented to Qatar by Kuwait, which is acting as a mediator during the crisis. Among the list’s demands are that Qatar sever all ties with the Muslim Brotherhood and other groups including Hezbollah, al-Qaida and the Islamic State; shut down its news network, Al-Jazeera; cut its diplomatic ties with Iran; and close down a Turkish military base. Earlier in the week, U.S. Secretary of State Rex Tillerson insisted that Qatar’s neighboring countries provide a list of demands that was “reasonable and actionable”. Qatar’s government did not immediately respond to the list, and neither did the United States.
11. The long-running conflict in Syria escalated to new heights over the weekend when the U.S. downed a Syrian government fighter jet. On Monday, Russia’s Defense Ministry responded to the incident, saying that “The shooting down of a Syrian Air Force jet in Syria’s airspace is a cynical violation of Syria’s sovereignty. Any aircraft, including planes and drones of the international coalition, detected in the operation areas west of the Euphrates River by the Russian air forces will be followed by Russian ground-based air defense and air defense aircraft as air targets”. Moscow also said that it had terminated the military “de-confliction” hotline used by U.S. and Russian forces to share information to help avoid unwanted clashes in the region.
12. Crude oil prices remained mired in the mid-$40 a barrel range this week as output from Nigeria and Libya, the two nations that are exempt from OPEC’s deal to lower production targets, rose. The more than 50,000 barrel-a-day climb in both Libya and Nigeria, along with a boost from Iraq, raised concerns that the ongoing global supply glut of crude oil would continue into the foreseeable future.
13. The euro briefly went higher against the U.S. dollar at the start of the week and then plunged lower in early trading on Monday. The drop halted late Monday, but the euro experienced another plunge in late trading on Tuesday that sent it to the lows for the week. The euro began a fairly steady climb back higher that lasted through Thursday morning when another reversal occurred. Friday saw the euro take a sharp turn to the upside and it appears set to close the week slightly higher against the U.S. dollar. The Japanese yen drifted sideways against the U.S. dollar at the start of the trading week, and then began a steady decline that lasted through early Tuesday morning. The yen reversed course early Tuesday, climbing back higher against the dollar in peaks and valleys, but appears set to close the week out slightly lower against the dollar.
The death of American student Otto Warmbier shortly after his release from North Korea in a comatose state has added a new level of tension to the relationship between the North and the U.S. Defense Secretary Jim Mattis said that Mr. Warmbier’s death “goes beyond any kind of understanding of law and order, of humanity, of responsibility towards any human being”. President Trump called North Korea’s treatment of Mr. Warmbier a “disgrace” and the President tweeted on Tuesday “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out. At least I know China tried!”. It was not immediately clear if the tweet indicated a shift in the U.S.’ policy towards either North Korea or China.
In Europe, the United Kingdom officially kicked off its “Brexit” negotiations on Monday, one year after its historic referendum that resulted in a vote to exit the European Union. The process is likely to be long and arduous and the economic effects on the U.K. could be extremely volatile as information leaks out of the negotiations. Prime Minister Theresa May’s failed bid to increase her party’s power in Parliament has also not likely made the task any easier. Ms. May gave a speech following a summit dinner in Brussels over the weekend and outlined what she called a “fair and serious offer” which a British official said was “aimed at giving as much certainty as possible to [EU] citizens who have settled in the UK, building careers and lives, and contributing so much to our society”. Ms. May went on to outline steps that would be taken to make sure that none of the roughly 3 million EU citizens currently residing in Britain would be deported at a future cut-off date. Ms. May went on to say that EU citizens who have been resident in the UK for five years would be allowed to stay for life and that others who had been there for less would be given a grace period. The fate of EU citizens residing in the UK is just one of the many issues that will have to be “ironed out” during the Brexit negotiations and is likely not going to be the toughest item on the list.
Tensions between the U.S. and Russia are on the rise this week after a U.S. fighter downed a Syrian government jet over the weekend. Russia has threatened to treat any coalition aircraft, including drones, carrying out operations west of the Euphrates river as a “target”. A Russian fighter also intercepted one of the U.S.’ spy planes over the Baltic Sea in an “unsafe” manner on Monday, according to U.S. Navy spokesperson Captain Jeff Davis. U.S. officials described the incident, saying that the Russian fighter flew within five feet of an RC-135 reconnaissance plane while it was over international waters on Monday morning. Captain Davis said “The vast majority of interactions we have, intercepts that occur when we fly and that are intercepted by the Russians, are safe. This is an exception, not the norm, but we were again operating in international airspace and did nothing to provoke”. Russia disputes the U.S. account of events, saying that “When being escorted, the RC-135 plane made an attempt at approaching the Russian fighter jet making a provocative turn towards it”. According to CNN, there have been over 30 interactions between Russian and US aircraft and ships near the Baltic Sea since the beginning of June.
As usual, it will be important to monitor global news outlets over the weekend for items of geopolitical significance which could have an effect on the prices of precious metals. Savvy investors have continued to follow their plan of acquiring additional physical precious metals to aid in diversifying their portfolios as temporary price dips have provided them with the opportunity to do so.
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 16th2017||June 23rd2017||Net Change|
|Gold||$1254.75||$1256.19||1.44 + 0.11%|
|Silver||$16.72||$16.71||(0.01) – 0.06%|
|Platinum||$929.50||$931.50||2.00 + 0.22%|
|Palladium||$878.00||$864.00||(14.00) – 1.59%|
|Dow Jones||21384.28||21394.76||10.48 + 0.05%|
Previous Year Comparison
|June 24th2016||June 23rd2017||Net Change|
|Gold||$1322.40||$1256.19||(66.21) – 5.01%|
|Silver||$17.79||$16.71||(1.08) – 6.07%|
|Platinum||$987.00||$931.50||(55.50) – 5.62%|
|Palladium||$546.50||$864.00||317.50 + 58.10%|
|Dow Jones||17400.75||21394.76||3994.01 + 22.95%|
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