1. Stocks continued to be extraordinarily volatile this week despite what appeared to be a relatively successful meeting between US President Trump and Chinese President Xi Jinping at the G20 conference in Buenos Aires over the weekend. The trading week was shortened in the U.S. due to a national day of mourning that was declared to honor former US President George H.W. Bush who passed away on November 30.

The Precious Metals Week in Review - December 7th, 2018
The Precious Metals Week in Review – December 7th, 2018

2. The seasonally adjusted number of Americans filing initial claims for state unemployment decreased by 4,000 claims to a new level of 231,000 for the week ending December 1. The previous week’s level was revised higher by 1,000 claims. The four-week moving average of claims increased by 4,250 to a new level of 228,000. The previous week’s moving average was revised higher by 500 claims. The usual surge in temporary hiring for the holiday season can be expected to skew the unemployment numbers over the next few months.

3. The Non-Farm Payrolls report for November was released on Friday and the data was worse than expected. Economists surveyed by Dow Jones had projected that the U.S. economy would add nearly 200,000 jobs in November and the figure came in at 155,000. Hourly wages grew at 0.2 percent instead of the estimated 0.3 and October’s job numbers were revised lower, dropping to 237,000 from the initially reported figure of 250,000. Stocks initially looked as if they would turn higher on the report as analysts projected that the weaker data may cause the Federal Reserve to move at a slower pace on interest rate hikes in 2019, but the upward momentum was quickly lost and stocks reversed course and continued the plunge that began earlier in the week as further global news came out during the day.

4. Rumors resurfaced this week that White House Chief of Staff John Kelly may be exiting his post in the coming days. NBC News reported on Friday that Nick Ayers, the Chief of Staff for Vice President Mike Pence may be one of the candidates that could take Kelly’s place. Kelly has frequently been at odds with President Trump and his departure has been rumored for many months and more than one analyst has said that they fear that Kelly might be one of “the last adults in the room” left at the White House.

5. President Trump and President Xi Jinping did hold a meeting over dinner at the G20 summit in Buenos Aires as expected and the meeting concluded with an apparent agreement to call a temporary truce in the ongoing trade war between the U.S. and China. The U.S. had previously said that it would raise tariff levels on roughly 200 billion in Chinese goods to 25% by the end of this year if no agreement could be reached on trade differences with China prior to then. Following the G20 summit, the U.S. announced that it would suspend the tariff increase for 90 days (beginning January 1) while it and China continue their trade discussions. On Friday, White House economic advisor Larry Kudlow said that Trump might consider extending that 90-day truce “if there’s good, solid movement and good action” on China’s side during the negotiation process.

6. In the Bond markets, yields on the 3-year Treasury note inverted with the yields on 5-year notes this week. Such a so-called “inverted yield curve” has historically been an indication that a recession could be on the way in the near term. The spread between the 2-year and 10-year notes is the more closely watched metric and those two have yet to invert. The Wall Street Journal reported that Fed officials do not know what their next move after the expected December interest rate hike will be, suggesting that Fed officials are contemplating a “one and done” or a “wait and see” approach to making interest rate moves in 2019.

7. On Tuesday, December 11, lawmakers in the U.K. will vote on whether or not they will accept Prime Minister Theresa May’s published draft plan for leaving the European Union (EU). The draft proposal needs the backing of over half of the MP’s that vote in parliament in order to pass and the outcome of such a vote is nowhere near certain. If the vote goes against the deal, and the margin of defeat is small enough, Theresa May could theoretically return to Brussels to attempt to get them to make adjustments to the proposal. If the margin of defeat is massive then things will likely get ugly in the U.K. political arena as May’s leadership would likely be openly called into question, possibly resulting in a call to replace her.

8. Crude oil remained under pressure all week until Friday when OPEC announced that it would cut oil production by 1.2 million barrels per day (bpd) to reduce oversupply and help support prices. The deal will reduce output by 1.2 million bpd for the first six months of 2019 and consists of a reduction of 800,000 bpd by OPEC as well as a further reduction of 400,000 bpd by Russia and other non-OPEC member countries. OPEC further agreed that Iran, Venezuela and Libya will be exempt from production cuts. The news of the production cuts sent oil prices immediately higher in mid-day trading on Friday. Brent crude pushed back over $60-per-barrel and WTI moved near the mid-$50-per-barrel range.

9. The euro spiked higher at the start of trading this week, dipped lower, and then trended higher in peaks and valleys through Tuesday afternoon. On Tuesday the euro dropped sharply, but did not fall into negative territory. The euro moved sideways through Wednesday and Thursday’s trading as U.S. markets had the day off and then spiked higher again late Thursday afternoon. The euro dipped slightly lower again late Thursday night and then moved sideways into Friday’s trading. Another push higher just prior to the close of trading on Friday will ensure the euro closes out the week higher against the U.S. dollar. The Japanese yen dipped against the U.S. dollar at the start of trading for the week but then spent the rest of the week climbing in a general upward trend. Despite a couple of downward moves through the week, the yen will also close the week out to the upside against the U.S. dollar.

The U.S. – China trade dispute remains the key item likely to drive continued market volatility, followed closely by the outcome of next week’s Brexit vote in parliament in the United Kingdom. The U.S. has agreed not to raise tariffs further on Chinese goods for at least the first 90 days of 2019 while trade negotiations proceed. Those already tense negotiations were made even more difficult this week when Meng Wanzhou, Chief Financial Officer of Huawei, was arrested by Canadian authorities in Vancouver on Saturday as she was changing planes at the airport. The basis of her detention is an extradition order from the U.S. citing Huawei’s violations of U.S. sanctions on Iran.

Gary Locke, former U.S. ambassador to China under President Obama, told the Wall Street Journal “I’m very concerned that [Meng’s arrest] is just going to ratchet this trade war [higher] and make negotiations much more difficult. This is I think a really hot button, almost a grenade, with respect to the 90-day negotiations.” Despite the incident, according to a tweet Friday morning from President Trump, “China talks are going very well!”

Brexit negotiations in the United Kingdom have reached a crucial inflection point. Prime Minister Theresa May has been hitting the political trail trying to garner support for the draft agreement between the U.K. and the European Union which was released last month. Her opponents, those who believe Brexit is not in the best interests of the U.K. or that simply feel that the draft deal treats the U.K. unfairly, have been equally hard at work trying to derail the process. Parliament will vote on whether to accept the draft agreement next Tuesday and if Prime Minister May fails to secure the votes of over half of the MPs then chaos could reign in U.K. politics once more. May has warned that if the draft deal fails to gain support, the only two options left are “No Brexit” which would violate the people’s referendum of 2016, or “No Deal”, which would see the U.K. exit the European Union with no plan in place to continue its trade relationships with the rest of Europe.  European Commission President Jean-Claude Juncker has also said that the draft deal that was agreed upon between the negotiators from the EU and UK is “the only deal possible.” Should Tuesday’s vote fail spectacularly, Prime Minister May could face a vote of No Confidence which could see her sent packing from the office.

A worse-than-expected U.S. Non-Farm Payrolls (NFP) report for November has analysts questioning whether the Federal Reserve can maintain its pace of interest rate hikes following the expected final hike for 2018 in December. Global economic growth appears to be slowing, only partly due to the trade friction between the U.S. and China, and that likely has the Fed concerned over moving too fast with raising rates as signs of inflation continue to grow in the U.S. By the end of Friday, the day that the NFP was released, stocks had wrapped up an extremely volatile week by completely erasing all of the gains that they had made for 2018, on track for their worst quarter in nearly 7 years.

At its 2018 peak, the Dow Jones Industrial Average was up more than 8 percent. The sell-off that began with tech stocks in the final quarter of 2018 has bled into other sectors as global uncertainty has increased.

As stock volatility continues to surge and global geopolitical uncertainty continues its inexorable rise, savvy investors remain committed to taking steps to ensure that their portfolios are sufficiently diversified. These investors believe that proper diversification can help protect against sudden drops in the equity markets like the one that took place this week. The contrarians among such investors seek out assets that have grown “unloved” and “oversold” as stock prices have surged and one such asset that many have begun to show renewed interest in is physical precious metals.

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. 30th 2018                        Dec. 7th 2018                        Net Change
Gold$1226.00$1252.6026.60 + 2.17%
Silver$    14.22$    14.700.48 + 3.38%
Platinum$  799.80$  790.40(9.40) – 1.18%
Palladium$1144.60$1170.8026.20 + 2.29%
Dow Jones25538.4624388.95(1149.51) – 4.50%

Previous Year Comparisons

Dec 8th 2017                        Dec. 7th 2018                        Net Change
Gold$1247.34$1252.605.26 + 0.42%
Silver$    15.80$    14.70(1.10) – 6.96%
Platinum$  886.00$  790.40 (95.60) – 10.79%
Palladium$  1009.50$1170.80161.30 + 15.98%
Dow Jones24329.1624388.9559.79 + 0.25%

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

GoldSilver
Support1240/1200/118014.50/14.30/14.10
Resistance1260/1280/131014.75/15.00/15.25
PlatinumPalladium
Support790/760/7401095/1080/1065
Resistance810/840/8651180/1195/1210

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

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