The Precious Metals Week in Review
1. It was a highly volatile week as markets awaited both the Federal Reserve’s meeting minutes from its last Federal Open Market Committee meeting and the June Non-Farm Payrolls Report on the state of the U.S. economy. Geopolitical and economic events seemed to take a back seat to U.S. economic news.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment increased by 4,000 claims for the week ending July 1 to a new level of 248,000. The previous week’s data was unrevised. The four-week moving average of claims increased by 750 to a new level of 243,000 from the previous week’s unrevised average.
3. The June Non-Farm Payrolls Report was released today and the numbers exceeded economists’ expectations. The U.S. economy added 222,000 jobs in June, against economists’ expectations for 179,000 jobs. Wage growth was weak however, with hourly earnings up just 2.5 percent on an annualised basis, unchanged from the month before. The official unemployment rate held at 4.4 percent. May’s numbers were revised up to 152,000 from the initial 138,000 reported and April was also revised upward, moving to 207,000 from 174,000.
4. North Korea test-launched a missile on Tuesday that it claimed is an Intercontinental Ballistic Missile (ICBM). It is not unusual for North Korea to undertake provocative actions surrounding important U.S. Holidays, such as July 4th, but expectations were for another test-launch of a more conventional short or mid-range missile. The projectile landed in Japan’s Exclusive Economic Zone according to Japanese officials. The North’s official news outlet KCNA said the missile was a Hwasong-14, which the organization described as “an almighty ICBM rocket” and that it was launched at a “steep trajectory, traveling 930 kilometers and reaching an altitude of 2,082 kilometers”. An NBC News translation of the transcript from KCNA said that Kim Jong Un “personally observed the launch on-site and declared glorious success throughout the world”. Analysts said that the trajectory of the missile appeared to be consistent with that of an ICBM and would give the projectile enough range to reach the U.S. state of Alaska if its capabilities could be confirmed.
5. Late on Tuesday, the U.S. confirmed that North Korea’s latest missile launch did appear to be an ICBM as stated by KCNA. Secretary of State Rex Tillerson called the event a “new escalation of the threat” to the U.S. In response to the North’s missile launch, U.S. and South Korean soldiers fired what were classified as “deep strike” missiles into South Koreas territorial waters in what the U.S. Eighth Army stated was a show of “U.S.-South Korean solidarity”. Rex Tillerson said “Global action is required to stop a global threat. Any country that hosts North Korean guest workers, provides any economic or military benefits, or fails to fully implement UN Security Council resolutions is aiding and abetting a dangerous regime”.
6. The Bank of Japan (BoJ) announced that it was stepping up its bond-buying program known as Quantitative Easing by purchasing an unlimited number of 10-year Japanese Government Bonds (JGBs) at a yield of 0.110 percent. It also increased the size of its normal purchasing program of five and 10-year JGBs by 50-billion yen to a new level of 500 billion yen. The BoJ has a target yield of 0 percent for JGBs and the new round of easing was in response to a recent rise in long-term bond yields.
7. The U.S. sent two B-1B Lancer bombers from Guam on Thursday to fly over the disputed waters of the South China Sea in a show of its view that the region should be treated as international airspace, despite China’s claim of ownership to nearly all of the territory. Chinese Foreign Ministry spokesman Geng Shuang said, when asked about the flight, that there was no problem with freedom of navigation or overflights over the East or South China Seas, “But China resolutely opposes individual countries using the banner of freedom of navigation and overflight to flaunt military force and harm China’s sovereignty and security”.
8. The 12th annual G-20 summit kicks off this weekend in Hamburg, Germany and the event was already marred by protests, some turning violent, which have so far injured seventy-six police officers and an unknown number of protesters. Police were forced to use water cannons and pepper spray against hostile masked protesters who threw rocks and vandalized businesses and cars in the street. It is estimated that up to 12,000 protestors have filled the streets of Hamburg so far, and it should be noted that not all of them have resorted to violence.
9. Crude oil prices dipped into the low $40-a-barrel range as weekly U.S. government data showed that U.S. oil production was up 1% to 9.34 million barrels a day. OPEC exports also rose for the second consecutive month in June, leading analysts to surmise that the ongoing global supply glut of oil was in no danger of ending any time soon.
10. The euro spent much of the week in steady decline against the U.S. dollar before finding a floor Wednesday afternoon. On Wednesday, the euro began a slight recovery, which accelerated into Thursday and sent the euro back to near even against the U.S. dollar for the week. Friday’s release of a better-than-expected Non-Farm Payrolls Report triggered a slight, but near vertical drop in the euro which appears set to see the currency close the week lower against the U.S. dollar. The Japanese yen started the week declining against the U.S. dollar, but the dip was halted late on Monday. The yen attempted to recover some ground, drifting sideways in brief peaks and valleys until Friday’s release of the U.S. Non-Farm Payrolls Report in tandem with the Bank of Japan’s announcement that it would be increasing its Quantitative Easing. Friday saw the yen resume its downward trend after the release of the data, and it appears set to close the week out lower against the U.S. dollar.
It was another volatile week in precious metals as yet another “flash crash” took place, this time in the price of silver. Much like the “flash crash” that took place in the price of gold on Monday, June 26 when parties unknown placed an order to sell the equivalent of 56 metric tons of gold during illiquid hours, the price of silver was manipulated down on Thursday night during Asian trading, dropping between 7 and 10 percent in just seconds. The price of silver was taken from $16 to $14.82 before immediately recovering back to $15.89, but the damage had been done as computers and algorithms appeared to take over and continue the selling. The plunge was blamed on another “trading error”, but that excuse is starting to wear thin in precious metals as the number of such incidents seems to become more and more frequent. Savvy investors took the opportunity that yet another obvious manipulation event presented to them and used it to stockpile more physical precious metals to aid in diversifying their portfolios away from heavy dependence on a stock market that appears to have increasingly soared into dangerous “bubble” territory at this point.
Friday’s better-than-expected Non-Farm Payrolls (NFP) report added to the downward pressure on precious metals as the initial positive media spin on the data spooked weaker hands into additional selling. Markets seemed singularly focused on the NFP, choosing to ignore the facts that: North Korea launched what the U.S. confirmed to be an Intercontinental Ballistic Missile (ICBM) capable of reaching the state of Alaska on Tuesday, July 4th; The Bank of Japan is being forced to step up its Quantitative Easing program because they can’t keep bond yields under control; Wage growth in the U.S., as reflected in the NFP, is consistently weak and showing no sign of helping the Federal Reserve achieve its 2 percent inflation target; The energy sector continues to show signs of collapsing as oil prices languish due to a global supply glut; Diplomatic relations in the Middle East over Qatar continue to be in crisis mode; Diplomatic relations between the U.S. and China appear to be deteriorating as China continues to militarize areas of the South China Sea; Diplomatic relations between the U.S. and Russia appear to be deteriorating as Congress presses ahead with stricter sanctions in the wake of Russia’s alleged interference in the U.S. election; Diplomatic relations between the U.S. and most of Europe seem to be growing tenser as European leaders lose faith in the U.S.’ ability to be a true ally; and finally, the governing heads of the G-20 all appear to be so universally hated that 76 police officers and an untold number of mostly anarchist protesters were injured at the outset of the latest G-20 summit taking place in Hamburg, Germany this weekend. In some cases, police forces were forced to result to riot gear, water cannons and pepper spray to counter the increasing violence.
Geopolitical tension has not gone away, in fact it has increased substantially as the year wears on. The stability of the Asian region, particularly that of the Korean Peninsula is highly suspect now that North Korea has apparently proven themselves to be equipped with long-range missiles which they claim to be capable of arming with nuclear warheads. In Europe, the U.K. continues to try to negotiate its best exit plan out of the European Union, but they finally seem to be realizing that their decision to vote themselves out means that they cannot keep the same benefits they enjoyed as a member. The financial impact to both London, and Europe as a whole, of the UK’s move to exit the EU has yet to be accurately determined.
Wise investors continue to monitor global news outlets and assess the state of the world, both geopolitically and economically, so that they can form an accurate “big picture” view of the true state of what is an undeniably globally connected economy before rushing into investment decisions. These investors use the information at hand to form well-informed decisions, avoiding the urge to “follow the herd” and trade on pure emotion. As always, especially now that North Korea knows they have the world’s focus and attention, it will remain important to monitor world news outlets for events that could trigger the bursting of the “economic bubble” and trigger a move higher in precious metals that could finally overwhelm what seem to be increasingly desperate attempts to manipulate the prices lower each time they show signs of recovery.
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 30th2017||July 7th2017||Net Change|
|Gold||$1242.40||$1211.50||(30.90) – 2.49%|
|Silver||$16.61||$15.50||(1.11) – 6.68%|
|Platinum||$ 924.40||$ 905.00||(19.40) – 2.10%|
|Palladium||$ 841.65||$ 842.00||0.35 + 0.04%|
|Dow Jones||21349.63||21424.34||74.71 + 0.35%|
Previous year Comparisons
|July 8th2016||July 7th2017||Net Change|
|Gold||$1358.40||$1211.50||(146.90) – 10.81%|
|Silver||$20.10||$15.50||(4.60) – 22.89%|
|Platinum||$1100.00||$ 905.00||(195.00) – 17.73%|
|Palladium||$ 617.00||$ 842.00||225.00 + 36.47%|
|Dow Jones||18146.74||21424.34||3277.60 + 18.06%|
Here are your Short Term Support and Resistance Levels for the upcoming week.