1. The ongoing chaos and gridlock in the U.S. government continued to foster an atmosphere of fear and uncertainty this week, keeping volatility in the equity markets alive and well. Stocks were on track for their worst December since the Great Depression in the 1930s.

The Precious Metals Week in Review - December 21st, 2018
The Precious Metals Week in Review – December 21st, 2018

2. The seasonally adjusted number of Americans filing initial claims for state unemployment increased by 8,000 claims to a new level of 214,000 for the week ending December 15. The previous week’s level was unrevised. The four-week moving average of claims decreased by 2,750 to a new level of 222,000. The previous week’s moving average was also unrevised. The usual surge in temporary hiring for the holiday season can be expected to continue skewing unemployment data.

3. The exodus out of the Trump administration continued this week as Secretary of Defense James “Mad Dog” Mattis submitted his resignation letter to the president on Thursday. In his letter, hand delivered to President Trump, Mattis said that the president had “a right to have a Secretary of Defense whose views are better aligned with yours.” Mattis continued, criticizing Trump’s handling of the U.S.’ allies and partners, saying that “our strength as a nation is inextricably linked to the strength of our unique and comprehensive system of alliances and partnerships.” Mattis said “My views on treating allies with respect and also being clear-eyed about both malign actors and strategic competitors are strongly held and informed by over four decades of immersion in these issues.” Mattis’ resignation immediately followed the Trump administration’s announcement that it would be withdrawing U.S. troops from Syria. Rumors surfaced late on Thursday evening that the White House has also ordered the Pentagon to “look into” plans for withdrawing U.S. troops from Afghanistan as well.

4. The Federal Reserve held its final Federal Open Market Committee (FOMC) meeting for 2018 and opted to raise interest rates by another quarter point. At the press conference following the conclusion of the meeting, Fed Chair Jerome Powell noted that the pace of interest rate hikes in 2019 is likely to slow, saying “where we are right now is the lower end of neutral.” Powell said the Fed is projecting at least two, with a maximum of three, rate hikes for next year, stressing that the central bank remains independent and will closely monitor economic data as it determines the course of monetary policy in 2019.

5. Gridlock in Washington, D.C. surged again this week as President Trump threatened to shut down the government if Congress does not provide his requested $5 billion in funding for the construction of “the wall” between the U.S. and Mexico. The deadline to pass spending bills on seven federal agencies, or to approve some sort of alternative stopgap spending bill is at midnight on Friday, December 21. Trump has said he would be “proud” to shut down the government if funding for his much-discussed wall is not included in the spending bills.

6. Stock markets continued their plunge this week, headed for their worst December performance since the Great Depression. Chaos in Washington, D.C. over the potential shutdown of the government likely created much of the pressure on stocks but concerns that the global economy is showing further signs of slowing also had a negative effect.

7. The U.S. Justice Department announced charges against two Chinese nationals this week, accusing them of participating in a global hacking campaign designed to steal company secrets and intellectual property from technology companies. Prosecutors also said that the two had acted in conjunction with the Chinese government, saying “China will find it difficult to pretend that it is not responsible for this action.” The U.S. and four of its closest allies jointly issued statements clearly blaming China for promoting the cyberattacks which have lasted nearly 12 years. China’s Foreign Ministry said in a statement on Friday that the Chinese government has “never participated in or supported” trade secret thefts. The Ministry also accused the U.S., U.K. and their other allied countries of spreading “rumors” about China, and said “We urge these countries to respect the facts and stop the deliberate defamation of China.”

8. Trade tensions between the U.S. and China remain high this week, despite the U.S. having called off, or at least postponed, its plan to hike tariffs further by the end of December if a trade agreement could not be reached between the two countries. At a diplomatic World Trade Organization meeting in Geneva, Switzerland this week China, along with several other countries, heavily criticized the U.S. for its recent protectionist stance with regard to its trade policies.

9. U.K. Prime Minister Theresa May, after her fruitless trip to Brussels to try to win additional concessions from the EU on the so-called “Irish Backstop” announced that the parliamentary vote on the draft Brexit package that she delayed last week will instead be held during the second half of January in 2019. It is unclear if the extra time will aid her quest to try to gain those concessions, or merely delay the misery of what seems more and more likely to be a “no” vote by parliament on the existing package. A “no” vote so close to the U.K.’s March exit from the EU will likely mean that the exit takes place with no deal in place at all.

10. The Bank of England held its own monetary policy meeting this week and opted to hold interest rates in the U.K. steady, calling the economic outlook “highly uncertain” and warning that uncertainty over Brexit had “intensified considerably” over the last month. The central bank noted that the uncertainties over Brexit are “weighing on financial markets” and reiterated that it could move interest rates in either direction following the U.K.’s divorce from the EU.

11. Crude oil plunged to 17-month lows, dropping 11 percent this week in their poorest performance in close to three years. Growing fears that the global economy may be headed into a recession sent U.S. West Texas Intermediate crude (WTI) to the mid-$40-a-barrel range while Brent crude plunged to the low $50-a-barrel.

12. The euro drifted steadily higher against the U.S. dollar for most of the week as the U.S. government appeared headed for yet another shutdown. The euro began seeing some volatility late on Wednesday after the Federal Reserve announced it would be conducting another interest rate hike, but the brief plunge quickly reversed and the euro continued onward to reach its highs for the week. The euro began moving back lower on Friday, but the fall appeared to be mostly controlled and the euro will still finish out the week to the upside against the U.S. dollar. The Japanese yen trended higher against the U.S. dollar nearly all week, pausing in its climb only briefly as the Fed made its announcement that it would hike interest rates. The yen had moved to its highs for the week by late Thursday and then moved sideways through Friday’s trading session where it will close out the week higher against the U.S. dollar.

Stock markets continued their December selloff, marking the worst performance for that month since the Great Depression. This week also marked the worst weekly losses for stocks since the early days of the 2008 financial crisis. The jitters in the stock market were exacerbated this week after the Federal Reserve appeared more “dovish” in its stance towards the global economy. The Fed came out and said that there would likely only be two interest rate hikes in 2019.

The Fed is being heavily criticized for missing what appear to be clear signs of a slowing U.S. and global economy, with inflation being largely tempered by falling oil prices. Most Fed-watchers were hoping for a clear “one and wait” approach to interest rates following December’s final hike and the announcement that there would be a reduction in the number of rate hikes, but not a pause, did not sit well with the markets. The central bank left themselves some wiggle room on being able to pause rate hikes next year by saying that they remained “heavily” data dependent in their decisions on rates.

In Europe, the standoff between the U.K. and the EU remains ongoing as Prime Minister Theresa May appears set to continue her quest to garner additional concessions from the European Commission regarding the “Irish Backstop” into the first half of January. That particular issue has been one of the main sticking points in drafting an agreement that would govern how the U.K. and EU will interact with each other in a post-Brexit world. The European Commission was adamant last week that there will be no further modifications to the current draft agreement and said that it will ratify the existing document.

The U.K. parliament remains defiant towards Ms. May’s efforts to garner support for the draft and when the vote is finally held next month it will likely be voted down. This would likely mean that the U.K. will exit the E.U. in March with absolutely no clear understanding of how the sale of goods and services and the movement of people between the two countries will be handled going forward.

The accusations leveled at Beijing this week that the Chinese government has been directly involved in cyberattacks on various countries and companies over the last 12 years raised tensions between China and the U.S. even more this week. The U.S. appeared to spearhead the accusations, despite several of its allies issuing similar statements of their own and the department of justice leveled charges on two Chinese nationals that it said were directly involved in the attacks. Beijing refutes the idea that it has been involved in these cyberattacks in any way.

Trade talks between China and the U.S. seemed to be on the back burner this week as the chaos that is the Executive and Legislative branches of the U.S. government took center stage in the media. President Trump threatened to veto any spending bills that came across his desk that did not contain the $5 billion in funding he is seeking for building “the wall” between the U.S. and Mexico. Democrats in the Senate have steadfastly maintained that they will not pass any such bill and the deadlock means that at midnight on Friday, several branches of the government will effectively shut down due to a lack of funding. The gridlock was one of many uncertainties that pressured stocks lower by the end of the week and as markets closed it did not appear that a solution was in sight to keep the U.S. government operating.

Stock analysts have continued their calls for people not to panic and to “stay invested” as the markets have plunged. Wise investors have already taken steps to make sure that their investment portfolios remain well-diversified to help them survive another potential market crash. These savvy investors sought out asset classes that appeared to be “beaten down” even while stocks were soaring to record highs. One such “beaten down” asset class that these investors have been keeping a watchful eye on has been precious metals, which many analysts have continued to say are oversold – and have been for quite some time.

As precious metals prices have remained suppressed during the stock run-up, savvy investors have continued to acquire more physical precious metals for the purposes of helping to diversify their portfolios

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)

Dec. 14th2018Dec. 21st2018Net Change
Gold$1241.40$1258.1016.70 + 1.35%
Silver$14.64$14.700.06 + 0.41%
Platinum$785.30$795.8010.50 + 1.34%
Palladium$1171.60$1158.70(12.90) – 1.10%
Dow Jones24100.5122445.37(1655.14) – 6.87%

Previous Year Comparisons

Dec 22nd2017Dec. 21st2018Net Change
Gold$1275.00$1258.10(16.90) – 1.33%
Silver$16.37$14.70(1.67) – 10.20%
Platinum$919.00$795.80 (123.20) – 13.41%
Palladium$1030.00$1158.70128.70 + 12.50%
Dow Jones24754.0622445.37(2308.69) – 9.33%

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
Resistance810/840/8801180/1195/1210

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

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