The Precious Metals Week in Review

June 30th,2017

1. Signs of trouble appeared in stock markets this week as tech stocks underperformed and concerns over the retail sector in the U.S. continued unabated.

The Precious Metals Week in Review June 30th, 2017
The Precious Metals Week in Review – June 30th, 2017.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment increased by 2,000 claims for the week ending June 24 to a new level of 244,000. The previous week’s data was revised higher by 1,000 claims. The four-week moving average of claims decreased by 2,750 to a new level of 242,250 from the previous week’s revised average. The previous week’s moving average was revised higher by 250 claims.

3. The St. Louis Fed President, James Bullard, told CNBC on Friday that he believes that “The Fed can afford to wait and see what comes out of the political process. Some of his [President Trump’s] policies can provide growth but they’ve got to get them through congress”.  Mr. Bullard continued, saying that “The committee has been too hawkish for the data during the last 90 days or so. The data has not been that great considering that we got going on this three hike process in December, March and June. You’d like to make a move like that on the back of pretty strong data for the U.S. economy but the consumption number was not that great”.  Mr. Bullard, usually a “hawk”, now apparently believes that the Fed should hold off on further rate hikes until next year.

4. The U.S. state of Illinois is on the verge of being declared “junk” investment status if it does not produce a budget over this coming weekend. If it fails to produce a workable budget, it will mark the third straight year without an agreement. Illinois holds the lowest credit rating of any U.S. state and its massive pile of unpaid bills already tops over $14.5 billion. Dropping to “junk” status will make borrowing and state funding even more difficult than it already is for the debt-laden U.S. state.

5. News broke this week that the U.S. intends to sell $1.42 billion worth of arms to Taiwan. China urged the U.S. to reverse its “wrong decision” to sell the arms, claiming it would send the wrong message to “Taiwan independence” forces.  China regards Taiwan as a rogue province and has never recognized its right to self-rule. The U.S. is the sole source of arms shipments to Taiwan and the Chinese embassy said “The wrong move of the U.S. side runs counter to the consensus reached by the two presidents in and the positive development momentum of the China-U.S. relationship. ” China’s defense Ministry said that Taiwan is “the most important, most sensitive core issue in Sino-U.S. ties” and warned that the proposed sale risks further damage to the stability of the Taiwan Strait.

6. On the same day that it announced the Taiwan arms sale, the Trump administration also announced its intent to place sanctions on two Chinese citizens and a Chinese firm for their dealings with North Korea. The two events have placed even more strain on U.S.-China relationships and has likely reduced any leverage the U.S. possessed for China to assist with the growing problem that is North Korea.

7. On Friday, President Trump appeared with South Korean President Moon Jae-in in the White House Rose Garden and said that he will continue to work with South Korea to deal with “the menace known as North Korea”.  Mr. Trump said “The era of strategic patience with the North Korean regime has failed, many years that it’s failed and, frankly, that patience is over”.

8. Another global cyberattack was unleashed this week that disrupted computers at Russia’s largest oil producer, several Ukrainian banks and some multinational firms. The attack was similar to last month’s “ransomware” attack that infected over 300,000 computers, demanding payment in bitcoin to unlock the machines.  Experts expect the impact of this latest attack to be smaller than the previous due to the sheer number of computer users that installed the applicable security patches after the last event.

9. In another phase of the ongoing diplomatic crisis in Qatar, several banks in the United Kingdom announced on Friday that they had stopped dealing in Qatari riyals because off-shore trading of the currency has become more and more volatile and lacking in liquidity. A spokeswoman for Lloyds Banking Group said “This currency [the Qatari riyal] is no longer available for sale or buy-back across our high street banks including Lloyds Bank, Bank of Scotland and Halifax”.  In response to the news, the Qatari central bank said “Qatari riyal’s exchange rate is absolutely stable against the U.S. dollar, and its exchangeability inside and outside Qatar is guaranteed at any time at the official price”.  The bank said that reports that some exchange companies had ceased buying the Qatari riyal were “baseless”.

10. Crude oil prices remained mired in the mid-$40 a barrel range this week as the U.S. finally showed signs of trimming production with oil prices continuing to languish. The Baker-Hughes rig count data showed that the U.S. shut down 2 oil rigs, the first decrease in rig counts in many, many months.

11. The euro moved sideways at the week’s open, then began a steady move higher against the U.S. dollar and will close the week to the upside against the U.S. dollar. The Japanese yen drifted steadily lower against the U.S. dollar during the week until late Thursday afternoon. Late Thursday, a near vertical surge higher sent the yen back near even but the move did not last and the yen soon began drifting lower against the dollar again. The Japanese yen appears set to close out the week lower against the U.S. dollar.

As President Trump concludes his meetings with South Korean President Moon Jae-in this week, focus will likely shift to the apparently increasingly strained relationship between the U.S. and China. The U.S. has pressured China to assist in convincing North Korea to abandon its nuclear ambitions, but comments and actions made during Moon’s visit this week could have eliminated any leverage that the U.S. might have held with Beijing.

This week the Trump administration announced plans to sell $1.42 billion worth of arms to Taiwan on the same day that it announced sanctions against two Chinese citizens and a shipping company for assisting Hong Kong with its nuclear ambitions. The U.S. also apparently leveled accusations at a Chinese bank for laundering money for Pyongyang. China was already at odds with the U.S. over its deployment of the Terminal High Altitude Area Defense anti-missile system into South Korea, and the news of the arms sale to Taiwan stoked their anger even further. The Chinese Foreign Ministry said “We firmly oppose the arms sale to Taiwan. We urge the U.S. side to abide by its solemn commitment to the ‘one China’ principle, stop the arms sales to Taiwan and any military contact to avoid further damage [to] our relations, and important cooperation in other fields”.

Elsewhere in Asia, Japan’s industrial output for May fell at its fastest rate of decline since 2011. Industrial output fell at 3.3 percent in May, due to a slowdown in production of vehicles and construction equipment, according to preliminary government data released on Friday. The decline did however, come on the heels of an April reading of an increase that was at the fastest pace in nearly six years, so the May reading might simply be a temporary anomaly.

In Europe, as the Brexit negotiations truly get under way, consumer confidence in the United Kingdom dropped sharply amid rising inflation and weaker wage growth, according to a survey released on Friday. Italy began winding up two regional banks on Sunday in the north-eastern Vento region that the European Central Bank had classified as “failing or likely to fail” last Friday.

Italy has finally reached an agreement with EU regulators that will allow it to use Italian insolvency procedures rather than stricter EU rules, which means Italy can use state funds to bail out its banks. Banking analysts project that the state, and thus Italian tax-payers, could wind up paying as much as 17 billion euros to bail out the two banks in question.

Amid growing friction between the U.S. and Germany, Commerce Secretary Wilbur Ross cancelled an upcoming trip to Germany at the last minute on Tuesday. Mr. Ross was supposed to meet with German Economy Minister Brigitte Zypries and to give an address at an event hosted by the Conservative Party’s economic council. Chancellor Angela Merkel said Monday that “on the issue of climate protection or free trade, we do not have this [an agreement] at the moment”.  Ms. Merkel also added that President Trump had a vision of globalization that was “different to mine – very much so”.

As the U.S. prepares to celebrate its upcoming Independence Day holiday, the trading week will be shortened next week. It will be important to monitor news outlets during the shortened week for events that could push precious metals prices higher.

North Korea and terrorist groups alike typically stage some sort of dramatic event around significant U.S. holidays and any unexpected shock could trigger panic in what already seem to be significantly overvalued stock markets.

Stock prices already showed signs of wavering this week, led by a declining tech sector. Analysts and media pundits began posing the question on whether some “air was coming out of the bubble” in a tacit acknowledgement that stock prices are already in bubble territory. Savvy investors recognized that stocks were in a potential bubble long ago and have already taken steps to diversify their portfolios against a drop in stocks. One way these investors have used for that diversification is to accumulate additional physical precious metals whenever temporary price dips have presented 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.

Trading Department
Precious Metals International, Ltd.

Friday to Friday Close (New York Closing Prices)

June 23rd2017 June 30th2017 Net Change
Gold $1256.19 $1242.40 (13.79) – 1.10%
Silver $16.71 $16.61 (0.10) – 0.60%
Platinum $931.50 $924.40 (7.10) – 0.46%
Palladium $ 864.00 $ 841.65 (22.35) – 2.59%
Dow Jones 21394.76 21349.63 (45.13) – 0.21%

Month End to Month End Close

May 31st2017 June 30th2017 Net Change
Gold $1273.00 $1242.40 (30.60) – 2.40%
Silver $17.42 $16.61 (0.81) – 4.65%
Platinum $949.80 $924.40 (25.40) – 2.67%
Palladium $821.45 $841.65 20.20 + 2.46%
Dow Jones 21008.65 21349.63 340.98 + 1.62%

Previous Year Comparison

Jun 30th2016 June 30th2017 Net Change
Gold $1320.60 $1242.40 (78.20) – 5.92%
Silver $18.62 $16.61 (2.01) – 10.79%
Platinum $ 1024.50 $ 924.40 (100.10) – 9.77%
Palladium $597.50 $841.65 244.15 + 40.86%
Dow Jones 17929.99 21349.63 3419.64 + 19.07%

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

                                         Gold                                    Silver
Support                   1240/1220/1200               16.60/16.40/16.20
Resistance              1270/1300/1320                16.90/17.10/17.40

Platinum                          Palladium
Support                   925/900/885                         825/800/775
Resistance              950/975/995                         850/880/900

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

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