1. Volatility in the global equities markets continued as weaker-than-expected economic data and the chaos surrounding Brexit fanned fears that the globally connected economy is headed for a slowdown.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment decreased by a staggering 27,000 claims to a new level of 206,000 for the week ending December 8. The previous week’s level was revised higher by 2,000 claims. The four-week moving average of claims decreased by 3,750 to a new level of 224,750. 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 as “seasonal adjustment” factors filter out a significant number of the “unadjusted” claims.
3. President Trump announced on Saturday that White House Chief of Staff John Kelly would be leaving his post by the end of the month. His departure leaves a significant hole in the White House leadership team. Kelly is likely to be replaced by Nick Ayers who is currently the Chief of Staff for Vice President Mike Pence but the decision has apparently not been finalized by President Trump as yet. Many view Kelly’s departure as potentially creating further disruption in an already dysfunctional White House.
4. China reported weak trade data over the weekend, sending Asian stock markets lower on Monday. Both exports and imports slowed in November, indicating that both global and domestic demand for Chinese-made goods appears to be slowing. On Friday, the pain continued as China reported weaker-than-expected retail sales and industrial output. The weaker data appears to indicate that President Trump’s tariff policies are having a significant impact on China’s economy as the two countries remain locked in negotiations to rebalance trade between them.
5. Next Week, the Federal Reserve will hold its final Federal Open Market Committee meeting of the year. The central bank is widely expected to conduct one final quarter point interest rate hike for 2018 but recent economic data has put the future of the rate hike path in 2019 in doubt. President Trump has been keeping heavy pressure on the Fed to slow its moves on interest rates and that casts a shadow over even the final expected hike next week. Many analysts have begun to say that the Fed should take a “wait and see” approach on further interest rate hikes as economic data appears to show a slowing global economy but the criticism leveled at the body by President Trump would call their independence into question if they failed to conduct their well-telegraphed rate hike in December.
6. The controversial vote on Brexit in the U.K. parliament that was to have taken place on Tuesday was called off at the last minute by Prime Minister Theresa May, likely due to an expected lack of support that would have seen the vote fail. The deferral of the vote led to an immediate no-confidence vote on Theresa May’s leadership, which she won by a margin of 200 votes for to 117 votes against. Winning the no-confidence challenge gives Ms. May a reprieve from further leadership challenges for at least another year. The parliamentary vote on Brexit can only be delayed to January 21, 2019, which leaves little maneuvering room for the U.K. to make further adjustments to the deal. The so-called “Irish backstop” is at the heart of the opposition to the withdrawal agreement. The border between Northern Ireland, which remains part of the U.K., and the Irish Republic, which remains part of the EU, has been one of the most controversial issues due to fears that there will be a “hard border” between the two despite their being geographically connected. The backstop as it currently exists in the agreement would mean Northern Ireland has a different relationship with the EU than the rest of the areas in the U.K.
7. Prime Minister May headed off to Brussels after winning her no-confidence vote in parliament to attempt to get EU leaders to give additional legal assurances over the Irish backstop that would give the deal a better chance of passing a parliamentary vote. May returned to the U.K. mostly empty-handed on Friday with the EU leaders issuing a joint statement saying “The Union stands by this agreement and intends to proceed with its ratification. It is not open for renegotiation.” The EU did clarify the Irish backstop issue, saying “It is the Union’s firm determination to work speedily on a subsequent agreement that establishes by 31 December 2020 alternative arrangements, so that the backstop will not need to be triggered”, adding that if the backstop was triggered it would only be temporary until a formal agreement could be established.
8. Crude oil prices remained under pressure this week due to volatility in stock markets and weak economic data out of China. Brent crude was hovering just above $60-a-barrel and WTI was in the low $50-a-barrel range. In a research note, Jim Ritterbusch of Ritterbusch and Associates said “The oil complex remains vulnerable to heavy selling into the equities especially when combined with a strengthening in the U.S. dollar.” OPEC is expected to begin cutting back on output in January but until then, and in the face of what appears to be weakening global demand for oil, the oil market remains in a state of oversupply.
9. The euro crept higher at the start of trading for the week, but had peaked by early Monday morning and began moving lower. The euro dropped sharply into negative territory against the U.S. dollar late on Monday but the fall was brief and the euro had crossed back into positive territory by Tuesday afternoon. The chaos surrounding the delayed Brexit vote sent the euro sharply lower again late Tuesday but the fall was quickly halted and the embattled currency began drifting higher once more. The euro nearly regained the ground it had lost against the U.S. dollar and then moved relatively sideways through late Thursday’s trading. Weak economic data out of China on Friday sent the euro plunging to its lows for the week and it will finish out lower against the U.S. dollar. The Japanese yen spiked higher against the U.S. dollar at the start of trading but soon began a steady move to the downside that lasted the rest of the week. The yen will finish the week out to the downside against the U.S. dollar.
Stock markets sold off significantly this week as volatility continued to reign. The Dow Jones Industrial Average nosedived to its lowest close since May on Friday as markets digested the latest global economic news. Economic data out of China this week was much weaker than expected and Friday’s news that both retail sales and industrial output had decreased in China appeared to be what triggered the plunge in stocks.
The Washington Post reported this week, citing U.S. officials as its source, that the Trump administration is preparing to condemn China this week for allegedly stealing U.S. trade secrets and technologies. The Post also reported that the Department of Justice is expected to announce charges against multiple hackers alleged to be working for a Chinese intelligence service. The news comes on the heels of the arrest of Huawei’s Chief Financial Officer last week in Canada as she was changing planes.
The China Daily, a state-run English language newspaper, blasted Canada on Sunday over that arrest, accusing it of conducting a “show trial” for the sole purpose of humiliating China for “challenging the U.S. in global technology leadership.” The paper said “The country [Canada] has surrendered to the United States’ ugly politics by detaining Meng Wanshou.” A warrant for Meng’s arrest was apparently issued in New York on August 22 for alleged violations of sanctions that the U.S. has imposed on Iran. China appeared to retaliate for the Canadian arrest by detaining two Canadian men on suspicion of “endangering national security.”
In the U.K., Prime Minister Theresa May survived a vote of no-confidence this week after cancelling a scheduled vote to approve the draft Brexit agreement between the EU and the U.K. Ms. May immediately went back to Brussels to try to renegotiate portions of the agreement but was apparently unsuccessful in those attempts. The joint statement released by EU leaders at the conclusion of a 2-day summit regarding the document said bluntly: “The Union stands by this agreement and intends to proceed with its ratification. It is not open for renegotiation.” The EU’s statement did go on to give reassurances over the so-called “Irish backstop” which has been one of the most contentious points of the negotiating process, but it is unclear if the reassurances will do anything to mollify those in the U.K. parliament who oppose the current draft due to the uncertainties surrounding the Irish backstop.
May’s leadership cannot be formally challenged for a year so it now appears certain that she will be the one leading the U.K. to the exits when the divorce between them and the EU becomes official in March – with or without an agreement in place. In the U.S., the Federal Reserve will hold its final Federal Open Market Committee meeting of 2018 and is widely expected to boost interest rates by another quarter point. The future of interest rate hikes in 2019 remains cloudy however. While signs continue to point to a vastly improving U.S. economy, the same cannot be said of the rest of the world.
Asia and Europe both appear to be slowing and the U.S. and the consumers that make up the majority of its GDP simply do not have the capacity to be the sole savior of the global economy. Stock analysts seem to be growing more cautious in their “buy the dip” recommendations as the uncertainty over the global economy escalates.
Wise investors continue to take steps to add assets to their investment portfolios that will ensure that they remain sufficiently diversified in the event of another substantial downturn in the equities markets. Many of these investors continue to add physical precious metals to their portfolios as part of their diversification strategy, taking advantage of price dips to acquire additional products for their portfolios at a discount.
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)
|Dec. 7th2018||Dec. 14th2018||Net Change|
|Gold||$1252.60||$1241.40||(11.20) – 0.89%|
|Silver||$14.70||$14.64||(0.06) – 0.41%|
|Platinum||$790.40||$785.30||(5.10) – 0.65%|
|Palladium||$1170.80||$1171.60||0.80 + 0.07%|
|Dow Jones||24388.95||24100.51||(288.44) – 1.18%|
Previous Year Comparisons
|Dec 15th2017||Dec. 14th2018||Net Change|
|Gold||$1255.41||$1241.40||10.80 + 0.89%|
|Silver||$16.05||$14.64||(0.06) – 0.42%|
|Platinum||$891.50||$785.30||(43.20) – 5.12%|
|Palladium||$1024.00||$1171.60||76.10 + 7.12%|
|Dow Jones||24651.74||24100.51||(551.23) – 2.24%|
Here are your Short Term Support and Resistance Levels for the upcoming week.
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© 2018, Precious Metals International, Ltd.