1. The partial shutdown of the U.S. government continued this week, entering its 28th day as the war of words between Nancy Pelosi, the Speaker of the House of Representatives, and President Trump continued to heat up.

The Precious Metals Week in Review - January 18th, 2019
The Precious Metals Week in Review – January 18th, 2019

2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 3,000 claims to a new level of 213,000 for the week ending January 12. The previous week’s level was unrevised. The four-week moving average of claims decreased by 1,000 to a new level of 220,750. The previous week’s moving average was also unrevised. We can continue to expect volatility in the unemployment numbers as the government shutdown drags on.

3. The partial shutdown of the U.S. government entered its 4th week with no clear sign of an end to the standoff. On Wednesday, House Speaker Nancy Pelosi suggested that President Trump postpone, or simply submit in writing, his upcoming State of the Union address, citing concerns that there would not be enough security to protect the House of Representatives during the address by the President. On Thursday, Trump canceled an overseas trip that Pelosi was supposed to embark on with other members of Congress to visit U.S. troops in Afghanistan, saying “it would be better if you were in Washington negotiating with me and joining the Strong Border Security movement to end the Shutdown.” Trump also announced that the U.S. would be sending no delegation at all to the upcoming World Economic Forum in Davos, Switzerland due to the ongoing shutdown.

4. Reports surfaced late on Thursday that Treasury Secretary Steven Mnuchin was considering easing some of the tariffs on China during the ongoing trade negotiations. The Wall Street Journal was first to report the news but added that Mnuchin faced “pushback from U.S. Trade Representative Robert Lighthizer, who thinks any concession could be seen as a sign of weakness.” A Treasury Department spokesman working with the trade team told CNBC later on Thursday however that “Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China. This is an ongoing process with the Chinese that is nowhere near completion.” That spokesman’s comment was later confirmed by a senior administration official who took part in a trade meeting with President Trump on Wednesday, saying there was “no discussion of lifting tariffs now.”

5. US retail traditional “brick and mortar” stores largely underperformed during the holiday season. Macy’s, long-embattled retailer J.C. Penney, Nordstrom and Kohl’s all posted underwhelming holiday sales, citing less foot traffic between Black Friday and Christmas than was expected. Some of these stores announced that they are now overstocked on inventory and will be using steeper promotions and sales in order to move the excess merchandise, which means even more pressure on their dwindling profits. Stacey Widlitz, president of SW Retail Advisors and a long-standing CNBC contributor, told the news outlet “When you hear three weeks ago that this was the best consumer environment ever, you go: ‘Wait a minute. What changed overnight?’” Moody’s noted that department store chains cut their overall square footage by 13 percent in 2018 and expects further trimming to take place in 2019, particularly as Sears and J.C. Penney continue to close store locations.

6. British lawmakers voted Tuesday on the draft Brexit agreement between the United Kingdom and the European Union and defeated it resoundingly with a margin of 432 votes against and just 202 votes for. Opposition leader Jeremy Corbyn immediately called for a motion of a no-confidence vote on the government which was held on Wednesday. Prime Minister Theresa May survived what was her second no-confidence vote to take place during her term, but now faces the daunting task of attempting to come up with a new Brexit plan in only a few days. She must have a new plan to present to parliament put together by this coming Monday. The EU has already adamantly stated that the deal that was voted down was the only one they would accept, so short of a “no deal” Brexit, or a new referendum reversing the decision, May’s only option might be to see if she can get the EU to extend the time beyond the upcoming March 29 deadline before initiating “Article 50” – the actual trigger that would officially see the U.K. exit the bloc – in order to give the U.K. more time to draft a new deal.

7. The aforementioned extension of time for the UK to draft up a new “Brexit” agreement would create serious headaches within the EU, given that European parliamentary elections will be taking place in the bloc between May 23 and 26. The European parliament is made up of members from all countries in the EU, including the UK. If the other member nations agree to extend the timeline for the U.K.’s exit past May then that means the U.K. would legally need to have representation in the European Parliament. Guy Verhofstadt, a member of the European Parliament and its main representative in the Brexit negotiations tweeted on Wednesday: “What we will not let happen, deal or no deal, is that the mess in British politics is again imported into European politics. While we understand the UK could need more time, for us it is unthinkable that article 50 is prolonged beyond the European Elections.” This comment alone could signal that the EU is willing to allow the U.K. until May to draft up a new proposal.

8. China reportedly has offered up a 6-year increase in U.S. imports in its trade talks with the U.S. The deal was apparently offered up earlier in the month during negotiations in Beijing, according to Bloomberg News. The deal would reduce the $323 billion trade deficit between the two countries down to zero by the end of the 6-year plan. Vice Premier Liu He, China’s top negotiator on trade, is set to visit Washington, D.C. on January 30 for two days’ worth of discussions with his U.S. counterpart, Robert Lighthizer so further details could be forthcoming in the weeks leading up to that visit.

9. U.S. Crude oil jumped to 6-week highs after China reportedly offered a plan to eliminate its trade surplus with the U.S. by 2024. A report released early in the week by the Wall Street Journal saying that the U.S. may be considering easing some of the tariffs it has placed on China also acted in concert with another report on Thursday that showed that OPEC’s oil output decreased markedly in December to help lift prices.

10. The euro began the week with a brief dip to the downside and then traded essentially sideways through late Tuesday morning. After the U.K. parliament voted down the Brexit deal, the euro took a fairly steep drop lower, staged a brief recovery, but then resumed its downward push as Tuesday finished up. The euro traded sideways again through late Thursday and then began a slight drift to the upside which lasted through Friday morning. Another steep drop just before closing on Friday will ensure that the euro hit its lowest point for the week and will close out to the downside against the U.S. dollar. The Japanese yen also began the week with a small dip to the downside against the U.S. dollar, but soon hit its highs for the week by Early Monday. The yen spent the rest of the week drifting slowly lower against the U.S. dollar in peaks and valleys and also accelerated its decline on Friday, though not as much as the euro, to close out to the downside against the U.S. dollar.

The partial shutdown of the U.S. government will likely continue to be the major item that affects markets in the near term. The shutdown has now gone on for nearly an entire month and the full and final impact to the U.S. economy is as yet unknown. Federal employees who are not getting paid cannot spend money at their local businesses and there are larger businesses that depend on some of the closed regulatory bodies such as the Food and Drug Administration to conduct their own business (Breweries and food producers to name just two). Given the reduction in consumer spending and the reduction in regulatory fees coming in to the government as inspection and permitting processes are halted, an already slowing economy could even begin to accelerate its decline.

The TSA, whose agents man the security lines at U.S. airports has experienced a growing number of employees who are not showing up for work because they simply can no longer afford to work without pay. This could begin triggering massive delays in airline traffic as security lines grow longer and planes are delayed which would further damage the U.S. economy.

The U.S.-China trade dispute, which has been the primary news item and market driver for months showed some positive signs of progress this week as reports surfaced that both sides appear to be considering compromises in the standoff that has plagued the ongoing negotiations. China has been reported to be considering increasing U.S. imports over the next six years to bring the trade surplus between the two down to zero and the U.S. has been reported to be considering reducing some of the tariffs that are already in place while those negotiations continue to show signs of being productive.

In the United Kingdom, parliament voted no on the draft Brexit package between the U.K. and the E.U. on Tuesday, crushing Prime Minister Theresa May’s hopes for an orderly exit when the March 29 deadline comes due. Opposition leader Jeremy Corbyn immediately called for a vote of no-confidence in May’s government. May managed to survive yet another no-confidence vote but the short time frame in which she must put together an alternate package (she must have another deal put together by Monday) means that the U.K. will either leave the EU with no agreement in place, the deadline for initiating Article 50 to exit must be extended beyond March 29, or the U.K. holds another referendum that reverses the original decision to exit.

Any of those scenarios will likely create chaos not only in the U.K. but in the E.U. as well. As the U.S. and U.K. create further chaos within their own political spheres – the U.S. with its government shutdown and the U.K. with its resistance to an orderly exit from the E.U. – we can expect market volatility to increase further.

The potential good news surrounding the U.S.-China trade negotiations jogged stock markets higher as the week came to a close, but if the shutdown continues much longer and the reports on progress in trade negotiations turn out to be only even half-true then those same markets could just as easily come collapsing down again.

Savvy investors continue to take steps to make sure that their portfolios remain diversified. Many analysts have begun turning to Gold again, calling it a potential safe-haven play as global uncertainty grows. Those wise investors who continued to buy physical gold for diversification purposes while prices were at such a steep discount have continued to accumulate additional product to help with the diversification of 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)

Jan. 11th2019Jan. 18th2019Net Change
Gold$1289.50$1283.00(6.50) – 0.50%
Silver$15.66$15.37(0.29) – 1.85%
Platinum$818.00$799.30(18.70) – 2.29%
Palladium$1331.50$1376.1044.60 + 3.35%
Dow Jones23995.9524706.35710.40 + 2.96%

Previous Year Comparisons

Jan 19th2018Jan. 18th2019Net Change
Gold$1333.50$1283.00(50.50) – 3.79%
Silver$17.04$15.37(1.67) – 9.80%
Platinum$1016.50$799.30 (217.20) – 21.37%
Palladium$1106.50$1376.10269.60 + 24.37%
Dow Jones26071.7224706.35(1365.37) – 5.24%

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

GoldSilver
Support1260/1240/120015.25/15.00/14.80
Resistance1290/1320/136015.60/15.80/16.00
PlatinumPalladium
Support790/760/7251350/1325/1300
Resistance810/840/8801375/1400/1425

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

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