The Precious Metals Week in Review – September 15, 2017

1. Hurricane Irma plowed ashore in Florida to much fanfare. Though the devastation was indeed quite extensive, a last-minute jog to the east weakened the storm enough to mitigate the actual damage that it wreaked. The sheer fact that the storm caused less than the estimated 200 billion dollars’ worth of damage seemed to send stocks to new record highs despite a severe escalation in geopolitical tensions.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 14,000 claims to a new level of 284,000 for the week ending September 9th, from the previous week’s unrevised level. The four-week moving average of claims was at 263,250, an increase of 13,000 from the previous week’s unrevised moving average of 250,250. As Houston rebuilds from hurricane Harvey, Florida now also enters into the unemployment mix as its businesses assess their ability to reopen and begin functioning to full capacity again.

3. Hurricane Irma moved slightly east as she came ashore and while the damage was devastating to the areas that suffered through the immediate landfall, the overall damage was significantly less than predicted. The back end of the storm fell apart as it began moving northward over land instead of over the shallow waters of the Gulf of Mexico and the storm began to slow significantly. It will likely still be months before the full cost of the back-to-back storms can be truly assessed, but Florida likely “dodged a bullet” economically due to the last-minute moves of Irma.

4. Hurricane Jose, which many analysts predicted would weaken and move off harmlessly to the north, refuses to go away. The storm did a wild loop out in the Atlantic, weakened somewhat, then regained some strength and appears to be headed towards the eastern coast of the U.S. The system is expected to regain hurricane strength and may impact the U.S. near New York. The storm is not currently expected to be a major weather impact, but given the recent display of total unpredictability by Hurricane Irma, anything might happen.

5. Law enforcement officials in the U.S. were advised to heighten their alert status to monitor for so-called “lone-wolf” terror attacks in Miami, Houston and other cities that were recently devastated by Hurricanes Harvey and Irma. Tweets that were linked to ISIS were uncovered on the anniversary of the September 11 attacks on the U.S. that called for attacks in Washington, New York, Los Angeles, Houston, Miami and Las Vegas.

6. In London, on Friday, an improvised explosive device was detonated on a packed commuter train during rush hour. The event is being investigated as a terrorist attack and 23 people were sent to the hospital for treatment though none of the injuries were considered to be life-threatening. Metropolitan Police Assistant Commissioner Mark Rowley said “We now assess that this was a detonation of an improvised explosive device.” He noted that most of the injuries appeared to be flash burns and he refused to answer questions regarding whether the identity of the suspected bomber had been uncovered as yet.

7. The United Nations voted earlier in the week to impose additional sanctions on North Korea for its continued pursuit of nuclear armaments after its sixth nuclear test. North Korea ramped up the rhetoric after the sanctions were approved, saying that it would “sink” Japan and reduce the U.S. to “ashes and darkness” for their roles in calling for the new, tougher sanctions. Early on Friday morning, local time, North Korea fired another missile off to the east which flew over Japan and landed in the Pacific. This latest projectile again flew over Hokkaido island, but this time landed far out into the Pacific. It flew farther, and higher, than any previous projectile the reclusive state has launched. South Korea immediately responded with live-fire exercises and Japan condemned the action. The UN Security Council will meet again late Friday afternoon to determine what additional steps to take to try to rein in the belligerent communist state.

8. In the Middle East, trouble may once again be brewing. An oil-rich province in northern Iraq plans to vote in an upcoming referendum on Kurdish independence later this month. The move sparked fears that regional conflict could break out again over who owns Iraq’s crude oil. The referendum is slated to be held on September 25th and Baghdad’s Prime Minister Haider al-Abadi declared the vote “unconstitutional and illegitimate.” On Tuesday, Iraq’s government authorized the prime minister to “take all measures” to preserve unity in Iraq.

9. Hurricanes Harvey and Irma will have far-reaching impact across the globe, in addition to the immediate visible damage in the U.S. and the Caribbean. Germany’s Munich Re, a major reinsurer, warned that it may likely miss its profit target this year after the double impact of the storms on the U.S. mainland and nearby Caribbean islands. Analysts at Jefferies said that they expect more such statements from foreign reinsurers as the scale of the damage from both storms is fully assessed.

10. U.S. crude prices held their levels after the damage from hurricane Irma wound up being significantly less than expected. Analysts’ projections for an increase in demand took over and helped to boost prices as east coast ports opened once again after Irma and Houston’s refining facilities all continue to be brought back online.

11. The euro dropped lower against the U.S. dollar throughout the week, seeing a significant drop on Thursday after U.S. inflation data seemed to show a boost in consumer inflation. Friday’s early morning launch of another missile by North Korea seemed to give a slight boost to the euro, but not enough to bring it back to even or positive territory for the week against the U.S. dollar. The Japanese yen had a smoother ride lower against the dollar than the euro did, drifting lower nearly the entire week. A slight bump on Thursday after U.S. inflation data was released was not nearly enough to put the yen into positive territory for the week and it appears set to close the week out lower against the U.S. dollar.

North Korea is likely to be the single-most important news item to monitor throughout the weekend. Their recent launch of another missile which flew through Japanese air space to land in the Pacific, at a greater distance than any previous launch, has triggered a substantial increase in activity at both the military as well as the diplomatic levels. South Korea responded to the latest missile launch immediately by holding live fire exercises and launching a missile of their own, which is likely only going to aggravate the tensions in the region even further.

The United Nations convened an emergency session to discuss possible responses to the latest aggression. The UN had already approved additional sanctions on North Korea earlier in the week prior to the latest missile test so it is unclear what further steps, if any, they could take to solve the problem of clear and growing North Korean military aggression through further use of diplomatic channels. North Korea’s threat to “sink Japan” earlier in the week also makes their second violation of Japanese air space with a ballistic missile even more urgent, in the minds of the Japanese.

In the U.S., the damage from Hurricane Irma turned out to be far less than predicted, thanks to a last-minute shift to the east as the storm blew onshore in Florida over the weekend. Despite the reduced damage estimates, the Gross Domestic Product for the U.S. will still likely suffer a sizeable hit in the final months of 2017 thanks to the impact of both Harvey and Irma.

In Europe, London suffered another terrorist event this week that fortunately did not result in any loss of life. The incident is a stark reminder however that vigilance must be maintained for the possibility of “lone wolf” style terror attacks. “Brexit” negotiations continue between the European Union and the United Kingdom, and there remains a high potential that ISIS or any other terror group may seek to disrupt the process and take advantage of the confusion.

In the Middle East, an upcoming Kurdish referendum in Iraq could trigger further unrest in that region. The Kurdish apparently are aiming to annex much of the oil-rich northern area of Iraq and Baghdad is taking strong steps to stop that process.

Savvy investors continue to accumulate Precious Metals as part of a well-balanced and diversified portfolio well in advance of a sudden investor rush into “safe haven” assets on further geopolitical and economic unrest.Such investors hope to be prepared well in advance of any abrupt bursting of what seems to be a growing bubble in stock markets.

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.

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