The Precious Metals Week in Review – December 29, 2017

1. This week we close out 2017, a year full of seemingly endless uncertainty and geopolitical strife. We have witnessed what appears to be the formation of the most epic bubble of all time in virtual currencies, a stock market that has now come to ignore every piece of bad news thrown its way, the start of fractures across the European Union and in the Middle East that show signs of growing into outright chasms of disagreement before the end of 2018. Next week will be a shortened trading week due to the New Year holiday so will likely be relatively quiet, but we can probably expect more chaos in 2018.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment was flat, coming in at 245,000 for the week ending December 23. The previous week’s level remained unrevised, but the numbers for the end of December are usually skewed due to the timing of the Christmas and New Year holidays and the winding down of temporary employment positions at retailers. The four-week moving average of claims increased by 1,750 to a new level of 237,750 from the previous week’s unrevised average. Claims taking procedures in both the Virgin Islands and Puerto Rico have still not returned to pre-hurricane norms.

3. In 2017, the U.S. dollar had its worst performance in 14 years in spite of multiple interest rate hikes by the Federal Reserve and promises of massive fiscal stimulus in the form of tax cuts and proposed infrastructure projects. Some strategists see further pain for the U.S. dollar as it competes with other currencies across the globe and inflation remains muted in the U.S. The continual uncertainty caused by the Trump administration could also weaken the dollar, as there are risks that planned NAFTA talks could fail and tensions between China, Russia and the U.S. could overflow into trade issues.

4. As the U.S. readies to celebrate the New Year over the weekend, security at larger cities and venues is being strengthened to levels never before seen in the wake of multiple attacks that were carried out on large crowds across the globe this year. New York has said that it will field the largest security detail ever in Times Square for the New Year’s Eve celebration. The officials in New York hope the larger force will work to prevent any attempts at a “lone wolf” style attack to spread terror and discord in the U.S.

5. North Korea has reportedly constructed an advanced reconnaissance satellite equipped with cameras and telecommunication devices, according to South Korean newspaper JoongAng Ilbo, citing an unnamed South Korean government source. Previous satellites launched by the North apparently lacked the ability to transmit any data back to Earth. Many analysts believe that North Korea is using its satellite launches as cover for further development of its long range ballistic missile program which it continues to pursue in defiance of crippling sanctions by the United Nations.

6. North Korea’s foreign ministry said this week that the new sanctions imposed by the United Nations Security Council on Friday were tantamount to a complete economic blockade of the country and are an act of war. The reclusive nation threatened to punish those countries that supported the measure, which was passed unanimously. The new sanctions, imposed as a result of the North’s latest ballistic missile test, are designed to limit its access to refined petroleum products and crude oil, cutting its fuel supplies by drastic amounts.

7. An explosion rocked a supermarket in Russia on Wednesday this week, injuring 13 people in St. Petersburg. Russian President Vladimir Putin said Thursday that the blast was the result of an act of terrorism. The explosive was a homemade bomb packed with pieces of metal and hidden in a locker where shoppers can leave their belongings. Putin, speaking at a ceremony awarding Russian personnel who served in Syria, said he had told the director of his security force “to act within the framework of the law when detaining these bandits of course, but if there is a threat to the life and well-being of our employees…to act decisively, not take any prisoners, and liquidate the bandits on the spot.”

8. In Spain, regional elections were held in Catalonia and the outcome of the vote has only served to complicate the Spanish political crisis even further. Separatist parties in Catalonia gained 70 seats in the 135-seat regional assembly, with exiled former First Minister Carles Puigdemont’s party being the largest group to gain seats. Puigdemont remains in exile in Brussels and will be almost certainly arrested immediately if he sets foot back in Spain so his party will likely have to recommend another candidate to lead Catalonia. The fact that so many separatists remain in parliament could mean that another election will be forced by Spain’s central government before the end of 2018.

9. Oil prices closed above $60 a barrel for the first time in 2 and a half years on Friday, ending the year up 12.5 percent. American output and stockpiles both suffered drops this week and ongoing production cuts by OPEC and Russia, along with rising Chinese demand for oil all acted to support prices as signs pointed to further reduction in the global supply glut that has plagued the industry for most of 2017.

10. The euro spent most of the week trending higher against the U.S. dollar and will close out the final week of the year to the upside. The Japanese yen bounced along fairly sideways against the U.S. dollar for most of the week. On Thursday, the yen took a near vertical leap higher in the morning, drifted sideways into Friday trading and then surged higher again. The yen will close the final week of the year out higher against the U.S. dollar.

This week closes out the last trading session of 2017 and brings to an end what has proved to be a highly tumultuous year. Next week will be a shortened trading week as we begin 2018 and activity is likely to be muted in the immediate post-holiday trading sessions.

In 2018, we can likely expect further geopolitical tensions in Asia, the Middle East, and even across the U.S. and Europe. The U.S. Congress remains dysfunctional, between the Senate and House of Representatives, and even though it successfully passed the much-debated tax reform legislation at the end of this year, the true impact of the new legislation will not likely be known for many months until the text of the new law can be studied thoroughly. Congress also managed to pass a couple of stop-gap measures in December to keep the U.S. government operational for a few more weeks at a time but failed to complete a full budget that details how the government will fund itself into 2018.

The latest emergency measure, called a “Continuing Resolution” expires on January 19 and was passed just hours before the previous measure expired at midnight on December 21. Congress and President Trump both left Washington, D.C. for the holidays so the amount of time they will have to draft and pass a full budget outlining the funding of the U.S. government will be extremely short when they return.

In Spain elections in Catalonia, forced upon the region by the Spanish central government in Madrid to replace the rebellious previous government, finally took place last week and it appears that the separatists have essentially regained control of the regional government in the wealthy autonomous region. This means that Spain’s constitutional crisis is far from over, and the result may actually pave the way for the return of Carles Puigdemont, the former leader who was forcibly removed by the central government in Madrid when he followed through on holding a referendum for Catalonia to secede from the rest of Spain earlier this year. Puigdemont has been living in exile in Brussels since the Spanish central government announced it would place him and the majority of his cabinet members under arrest.

Brexit negotiations continue in the United Kingdom and there appears to be a growing conflict between Parliament and Prime Minister Theresa May on who will have the final say on the completed Brexit agreement. Parliament continues to show signs that it might undercut Prime Minister May’s efforts to lead the U.K. out of the European Union by 2019.

North Korea should also be expected to continue to be a growing danger to the world as it refuses to give up its quest for nuclear capable intercontinental ballistic missiles (ICBMs). The continual sanctions that the United Nations have put in place on the North to try to bring them to the negotiation table to discuss abandoning such a dangerous path appear only to have angered them further and strengthened their resolve to arm themselves, whatever the cost may be to their citizenry.

Questions have even been raised recently on whether Chinese and Russian shipping companies may be covertly ignoring the very sanctions that the UN has put in place to rein in the hermit nation, possibly delivering oil and other goods to North Korea via ship-to-ship transfer at sea in direct violation of the sanctions.

As the New Year begins, it will be important to watch world news outlets for events that could act to increase market volatility. If the bubbles in Bitcoin and equities suddenly burst early in the new year due to a dramatic increase in geopolitical tensions or macroeconomic pressure, there could be a massive surge in interest for physical precious metals as investors once again turn to the historical “safe haven” asset that tends to protect their wealth in times of turmoil. Savvy investors have used temporary price dips in precious metals to acquire more physical product as part of their plan to keep their portfolios diversified against such events.

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)

Month End to Month End Close

Previous year Comparisons

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

This is not a solicitation to purchase or sell.
© 2017-2018, Precious Metals International, Ltd.