1. Mid-term elections in the U.S. were the big news of the week and the results will likely mean that governmental gridlock in Washington, D.C. will return in full. Republicans maintained control of the Senate, but the Democrats have taken the majority in the House of Representatives.

The Precious Metals Week in Review - November 9th, 2018
The Precious Metals Week in Review – November 9th, 2018

2. The seasonally adjusted number of Americans filing initial claims for state unemployment decreased by 1,000 claims to a new level of 214,000 for the week ending November 2. The previous week’s level was revised higher by 1,000 claims, making the net change a zero. The four-week moving average of claims decreased by 250 to a new level of 213,750. The previous week’s moving average was revised higher by 250 claims, also making the change to that figure a net zero.

3. The U.S. Federal Reserve held another Federal Open Market Committee meeting to set U.S. monetary policy this week and opted to keep interest rates unchanged, as was widely expected. Most Fed-watchers expect another rate hike in December this year, and potentially 3 or 4 more in 2019. A potential slowdown in global economic growth however, has other analysts concerned that the Fed might not continue to raise rates on such a regular schedule. Should the Fed decide not to implement the expected rate hike in December, it could send markets into turmoil as it could give the impression that the Fed has finally given up some of its supposed independence under President Trump’s continual criticism over each rate hike.

4. According to CNBC’s Brian Schwartz, citing “three people familiar with the matter”, President Trump is “telling people he wants to replace Commerce Secretary Wilbur Ross by the end of the year.” A senior administration official close to Mr. Ross refuted the rumors, saying “There is no indication that Secretary Ross will be gone any time soon. He’s posted significant wins for the president’s trade agenda and that shows.” Another official noted that Trump “has never voiced any discontent” over Ross’s performance.

5. Stock markets in Europe were under pressure this week as investors digested comments from the U.S. Federal Reserve regarding its future interest rate plans. Comments by Italian Finance Minister Giovanni Tria also factored into the declines as he said he had no intention of trimming Italy’s highly controversial 2019 budget, as directed by the European Commission. Tria commented that reducing the budget by the amount demanded by the EU would be tantamount to “suicide” for Italy’s economy.

6. Analysts told CNBC that the standoff between Rome and Brussels looks set to continue for the near term and that the fight could eventually lead to the possible placement of sanctions on Italy, despite the fact that no EU country has ever previously been fined for breaching spending limits. Berenberg economist Florian Hense sent an e-mail to CNBC on Friday saying “Continued pressure from the EU, further ratings downgrades and even higher risk spreads will force Rome to soften its policies by just enough in coming months to stave off an immediate debt crisis.” Pierre Moscovici, one of the European Commissioners, weighed into the fray and said, while speaking with reporters on Thursday, that “We (the EU) would like Italy to remain what it is, a major country within the euro zone, there is no future for Italy outside the euro zone, there is no future for Europe without Italy.”

7. In its fall forecasts, released on Thursday, the European Commission projected that the entire 19-member euro zone might see lower economic growth as 2018 begins winding down. The Commission also projected that the slowdown would continue into 2019 and 2020, qualifying its forecast by saying “There is a high degree of uncertainty surrounding the forecast and there are many interconnected downside risks. The materialization of any of these risks could amplify the others and magnify their impact.”

8. In the United Kingdom, Brexit talks continue to struggle on, with European Council President Donald Tusk continuing the mantra we have all heard for months now that he hopes for a “breakthrough within days”. On Friday in the UK Jo Johnson, brother to outspoken former Foreign Minister Boris Johnson, submitted his resignation as a junior transport minister. Johnson commented as he left that the current options on the table for the British government – a delayed exit or “no-deal”“present the nation with a choice between two deeply unattractive outcomes, vassalage and chaos.” Johnson also commented that it was time to consider a new vote on Brexit in the UK.

9. In Turkey, prices in October rose by 25.2 percent year-on-year – the highest inflation rate in that country in 15 years. Even the so-called “core” inflation, which strips out volatile items like energy and food prices, was elevated. The headline rate for inflation is well above the central bank’s 5 percent target, driven there by the plunge of the lira against the U.S. dollar. Turkey’s central bank is under pressure from President Recep Tayyip Erdogan to lower its interest rates to promote consumer spending and lending in order to promote economic growth but has so far been able to maintain its independence, choosing to raise interest rates instead to attempt to tame the escalating inflation in the country.

10. Crude oil continued to suffer this week, as the impact on U.S. sanctions against Iran was apparently less than feared. Concerns that the oil market could resume its state over glut and oversupply acted to keep downward pressure on prices. Brent Crude closed the week in the upper-$60 to low $70-a-barrel range and WTI closed the week just under $60-a-barrel.

11. The euro began the week trending slightly higher against the U.S. dollar, with the climb accelerating into Wednesday. The euro had reached its highs for the week by late Wednesday and began a decline that plateaued as Thursday trading began, but began accelerating further to the downside late on Thursday. The euro had hit its lows for the week by Friday and will close out the week to the downside against the U.S. dollar. The Japanese yen moved largely sideways against the U.S. dollar for most of the week. The yen began bouncing in wider bands between positive and negative on Tuesday and Wednesday and then began a fairly steady move to the downside late Wednesday afternoon. The yen had hit its lows for the week by late Thursday and began a slight recovery but will still finish the week out to the downside against the U.S. dollar.

Now that the U.S. mid-term elections have passed, we can likely expect near complete gridlock out of the U.S. government in the runup to the 2020 elections. Republicans maintained control over the Senate, but the House of Representatives saw the Democrats take over the majority. The Democrats have already begun issuing warnings that they may pursue additional investigations into President Trump.

The contentious nature of Trump’s relationship with Congress is likely to grow even more fractious and we can also likely expect Trump’s Twitter account to continue to be highly active and full of his characteristic venom and bravado throughout the next two years. The elections drew attention away from the ongoing trade dispute between the U.S. and China but the situation remains unresolved.

Rumors continue to fly that U.S. President Donald Trump and Chinese President Xi Jinping will meet at the upcoming G20 Summit in Buenos Aires from November 30 through December 1. The Summit likely won’t afford the two much time to have a lengthy discussion on the trade differences between the two countries, but the fact that they might actually undertake a meeting with each other is somewhat encouraging. Trump continues to maintain that the U.S. is ready to implement a round of additional tariffs on another $267 billion of Chinese imports into the U.S. if no agreement can be reached by December. Xi Jinping spoke at the opening of a week-long import expo in Shanghai on Monday and said that China will lower import tariffs and continue to broaden market access. Xi said that the expo demonstrated China’s desire to support global free trade and he gave a thinly veiled critique of the United States by saying “economic globalization is facing setbacks, multilateralism and the free trade system is under attack, factors of instability and uncertainty are numerous, and risks and obstacles are increasing.”

The European Union, who also maintains a large trade deficit with China similar to the U.S., said it would not sign up for any sort of political statement while attending the forum and called on China to follow through on Xi’s statements to open its markets to foreign firms and help level the playing field. The standoff between Italy and the European Commission over its draft 2019 budget continued this week. Brussels rejected Italy’s draft budget and the theatrics that ensued by Italian officials did nothing to calm nerves.

Italian Finance Minister Giovanni Tria said this week that he will refuse to trim the budget to reduce public spending further, calling such a move “suicide” for Italy’s economy. Brussels maintains that Italy must reduce its public debt further and therefore that its only choice is to make additional spending cuts in the public sector.

Brexit talks continue to be mired in uncertainty in the UK, with the latest poll by Reuters still estimating between a 20 and 30 percent chance that no deal will be agreed to by the March 29 exit date. The issue that remains the largest sticking point in the discussions is the U.K.’s border between Northern Ireland and the Republic of Ireland.

The EU is apparently concerned that one of the plans floated to resolve the border situation, the so-called “Irish border backstop” could give the UK unfair access to the EU’s single market through a customs zone at the Irish border.

As signs continue to grow that the global economy is beginning to slow, investors remain committed to seeking out ways to ensure that their portfolios remain diversified so that the risk of a sudden downturn might be mitigated some. As precious metals prices continue to appear more and more oversold, some investors are using the price drop as an opportunity to acquire physical precious metals at an apparent discount as a part of their plan to remain diversified.

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)

Nov. 2nd2018Nov. 9th2018Net Change
Gold$1233.30$1208.60(24.70) – 2.00%
Silver$14.76$14.14(0.62) – 4.20%
Platinum$875.70$856.00(19.70) – 2.25%
Palladium$1104.50$1097.50(7.00) – 0.63%
Dow Jones25270.8325989.301300.99 + 5.27%

Previous Year Comparisons

Nov 10th2017Nov. 9th2018Net Change
Gold$1274.50$1208.60(65.90) – 5.17%
Silver$16.89$14.14(2.75) – 16.28%
Platinum$930.50$856.00 (74.50) – 8.01%
Palladium$998.00$1097.5099.50 + 9.97%
Dow Jones23422.2125989.302567.09 + 10.96%

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

GoldSilver
Support1200/1180/116014.10/13.90/13.70
Resistance1230/1240/126014.30/14.50/14.75
PlatinumPalladium
Support840/810/7901095/1080/1065
Resistance865/880/10001180/1195/1210

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

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