1. Markets remained volatile this week as the U.S. government shutdown continued, tying the record for the longest such shutdown in U.S. history. Contentious meetings between members of Congress and President Trump failed to make any headway in attempts to resolve the standoff over funding for his wall along the Mexican border.

The Precious Metals Week in Review - January 11th, 2019
The Precious Metals Week in Review – January 11th, 2019

2. The seasonally adjusted number of Americans filing initial claims for state unemployment plunged by 17,000 claims to a new level of 216,000 for the week ending January 7. The previous week’s level was revised higher by 2,000 claims. The four-week moving average of claims increased by 2,500 to a new level of 221,750. The previous week’s moving average was revised higher by 500 claims. We can continue to expect volatility in the unemployment numbers as the temporary positions that many retailers advertised and filled in October and November to meet the expected holiday rush continue to disappear.

3. New home sales in the U.S. plunged at the end of December, when compared with a year earlier. Sales plummeted 18 percent to end 2018, following on a similar plunge in November. Despite the government shutdown keeping many of the usual economic data reports from being issued, housing data has managed to trickle out and it does not paint a pretty picture. John Burns, CEO of JBRC, blamed climbing interest rates for the drop, saying “I think the 4.5 percent plus mortgage rate is just a double whammy. It’s keeping entry level buyers out of the market. They’re very disappointed with what they can afford, and it’s keeping current homeowners who want to move locked in, because their current mortgage rate is so much lower.

4. President Trump walked out of a meeting about the ongoing government shutdown with top Democratic leaders on Wednesday, calling it “a total waste of time.” Trump gave Nancy Pelosi and Chuck Schumer just half an hour before walking out, and issuing a tweet shortly after saying “Just left a meeting with Chuck and Nancy, a total waste of time. I asked what is going to happen in 30 days if I quickly open things up, are you going to approve Border Security which includes a Wall or Steel Barrier? Nancy said, NO. I said bye-bye, nothing else works!” In a joint press conference afterwards, Schumer and Pelosi said “Unfortunately, the President just got up and walked out. He asked Speaker Pelosi if she would fund his wall and she said ‘no’ and he said, ‘Well then, we have nothing to talk about.’ and got up and walked out.”

5. Retail companies in the U.S. continue to show signs of increasing trouble as “earnings season” gets underway. Macy’s reported weaker than expected holiday sales and trimmed its outlook for its 2018 earnings on Thursday. Gerald Storch, a former CEO and an executive at Target told CNBC on Thursday that Macy’s report indicates that “Traditional department stores are fighting for their lives in an Amazon era.” Storch continued, saying “even if Macy’s does everything right, it may not be enough.” Storch clearly has some experience with what he was discussing, having been the CEO of failed retail toy giant Toys R Us who closed the last of their stores last year in bankruptcy.

6. Chinese tech giant Huawei faced further crisis this week when Poland’s counterintelligence agency arrested and charged its sales director and an ex-security agent with espionage. The news comes relatively close on the heels of the arrest of the company’s CFO Meng Wanzhou for allegedly violating U.S. sanctions. While the sales director is a Chinese national, the ex-security agent is apparently a Polish national who worked for a Polish subsidiary of Orange, a French telecommunications firm. Both Huawei and Orange’s local offices were searched by the Internal Security Agency and apparently documents were seized in both locations. Huawei, a giant in the telecommunications industry, has been blocked from having its equipment installed in the 5G networks of Australia and New Zealand on fears that the gear might be a threat to national security.

7. Signs that China’s economy is weakening continued after Apple warned earlier this month that its iPhone sales would come in under projections due to weakness in the China economy. Goldman Sachs appears to agree with Apple’s outlook saying that Starbucks will likely be the next victim of a slowdown in China. The firm cut Starbucks to neutral from buy on Friday, citing “a number of points of caution on China.” Goldman went on to refer to Apple’s earlier report along with a report of softer China sales by McDonald’s as evidence of the slowdown. Goldman’s Karen Holthouse, in a note to clients, said “The recent AAPL announcement (while potentially also product-driven) cited trade concerns/macro, and MCD [McDonald’s] acknowledged softer trends in the region at a late November event. The GS macro team also expects a continued slow down in GDP, at least partially driven by consumption.”

8. U.S. Crude oil inventory fell less than expected while refined inventories jumped for the week ending January 4, according to the U.S. Energy Information Administration. Both Brent and U.S. WTI prices dipped in response to the report and on concerns that slowing global growth could lead to a further build-up in global inventories. Prices remain supported however, by hopes that the U.S. and China might resolve their trade dispute soon as well as continued optimism that production cuts from OPEC and other nations will help alleviate some of the oversupply.

9. The euro began the week moving steadily to the upside against the U.S. dollar, pausing to drift sideways throughout Tuesday afternoon. Late Wednesday, the euro spiked suddenly higher and had hit its high against the U.S. dollar by Thursday morning. The euro drifted back towards the downside through the rest of Thursday but rebounded as Friday trading began. The climb was brief and short-lived on Friday and the euro plunged suddenly lower just prior to the close of trading. Despite Friday’s plunge, the euro still appears set to close the week out higher against the U.S. dollar. The Japanese yen had a bit of a rollercoaster ride against the U.S. dollar this week. The yen dipped at the start of trading, immediately began climbing higher, then began a downward trend that lasted most of the way through mid-morning on Wednesday before the yen suddenly surged to the upside. The yen hit its high for the week late Thursday morning and then drifted back lower through Friday’s trading. Friday’s activity saw the yen back near where it had started for the week and the yen appears set to close out the week near even, or slightly lower against the U.S. dollar.

The U.S. government shutdown is entering uncharted territory after this week. This will have been one of the longest such shutdowns in history, having now tied the 1995-1996 shutdown, and projections are that if it carries on for another two weeks then the cost to the U.S. economy could very well equal the cost of the $5.7 billion in funding that President Trump was requesting to build his pet “wall” project and apparently began the whole ordeal in the first place.

The shutdown, which has kept Federal employees from receiving a paycheck for weeks, is beginning to trickle down into main street as businesses that count those federal employees among their loyal customers are seeing a sharp drop off in sales. Washington, D.C. based restaurants are particularly feeling the pain as the partial shutdown passed the three-week mark. Founding Farmers, a restaurant with locations in D.C., Maryland and Virginia, told CNBC that their sales are down between 15 and 30 percent. The slowing business means that servers see less tips and may soon have their hours trimmed. The restaurant also buys from smaller family-owned farms and is now purchasing fewer products from them as food sales decrease.

There appears to be no near end in sight for the shutdown as Democrats in the House of Representatives, which they now control, have dug in their heels on refusing to provide funding for Trump’s wall.

In Europe, German industrial production dropped 1.9 percent month-on-month in November which was far below the general consensus of a positive growth story. J.P. Morgan economist Greg Fuzesi said in a note on Tuesday that “The very bad run is continuing and it is now possible that German gross domestic product stagnated in the fourth quarter of 2018. Of course, the German industrial production data are very noisy, but even with a big rebound in December, it is no longer possible to rule out even a small GDP contraction in the fourth quarter of 2018.” Andreas Rees, chief German economist at UniCredit, also commented in a note on Tuesday, saying “Both the latest hard and soft data coming from the German industrial sector have been so surprisingly weak that they also convey a fundamental message. In our view, there is something brewing, probably triggered by less dynamic global trade.” Rees continued, saying that fourth quarter GDP data in Germany is “likely to be far weaker than expected” and that stagnation in the German economy for the fourth quarter of last year “cannot be excluded.”

In the United Kingdom, the much-discussed Brexit vote by the U.K. parliament on the draft plan for exiting the European Union is set to be held on Tuesday and the draft deal will most likely be voted down. A “no” vote could trigger the complete collapse of Theresa May’s government and a “no deal” exit from the EU that could cause chaos. The UK is set to leave the EU at 11:00PM on March 29 and with no agreement in place ahead of that date, the U.K. could be faced with massive uncertainty, including possibly scrapping the plan to exit the EU altogether. If the deal is voted down next Tuesday, the British government would have just three parliamentary working days to come up with a new draft.

As global economic and geopolitical uncertainty continues to escalate, savvy investors have been taking steps to make sure that their portfolios are diversified against such uncertainties. Many of these investors have turned once again to precious metals, buying them as prices for most metals have remained suppressed, in the hopes that they will be viewed once more as a “safe haven” in times of economic and geopolitical uncertainty.

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)

 Jan. 4th 2019                        Jan. 11th 2019                        Net Change
Gold$1284.00$1289.505.50 + 0.43%
Silver$    15.73$    15.66(0.07) – 0.45%
Platinum$  822.15$  818.00(4.15) – 0.50%
Palladium$1299.40$1331.5032.10 + 2.47%
Dow Jones23433.1623995.95562.79 + 2.40%

Previous Year Comparisons

 Jan 12th 2018                        Jan. 11th 2019                        Net Change
Gold$1336.00$1289.50(46.50) – 3.48%
Silver$    17.14$    15.66(1.48) – 8.63%
Platinum$  997.00$  818.00 (179.00) – 17.95%
Palladium$1120.00$1331.50211.50 + 18.88%
Dow Jones25803.1923995.95(1807.24) – 7.00%

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

GoldSilver
Support1260/1240/120015.60/15.25/15.00
Resistance1290/1320/136015.80/16.00/16.25
PlatinumPalladium
Support810/790/7601325/1300/1280
Resistance840/880/9001350/1375/1400

This is not a solicitation to purchase or sell.
© 2019, Precious Metals International, Ltd.

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