1. The standoff over “the wall” continued this week as the partial shutdown of the U.S. government passed the one month mark – the longest such shutdown on record. The effects of the shutdown are now beginning to be visible within the American economy as furloughed workers have stopped spending money they no longer have.

The Precious Metals Week in Review - January 25th, 2019
The Precious Metals Week in Review – January 25th, 2019

2. The seasonally adjusted number of Americans filing initial claims for state unemployment plunged by 13,000 claims to a new level of 199,000 for the week ending January 12. The previous week’s level was revised lower by 1,000 claims. This is the lowest level for initial claims since November of 1969. The four-week moving average of claims decreased by 5,500 to a new level of 215,000. The previous week’s moving average was revised lower by 250 claims. 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 stretched to 35 days this week and there appeared to be no clear sign of an end to the standoff between President Trump and the Democratic Party. Nancy Pelosi wrote Trump a letter this week saying “I am writing to inform you that the House of Representatives will not consider a concurrent resolution authorizing the President’s State of the Union address in the House Chamber until the government has opened.” The President’s initial response was that he would just give the address in a different location, but by Wednesday he had walked that statement back, saying “Well, it’s really her choice. I mean, I would have done it in a different location, but I think that would be very disrespectful to the State of the Union, to pick some other place.” In late-breaking news on Friday, President Trump announced that he had reached a deal with the Democrats that would see the government reopened for 3 weeks while negotiations went on over the funding he requested for the wall.

4. Apparently reports that air traffic controllers were calling out sick, in addition to the Transportation Security Administration (TSA) agents that were already doing the same were enough to pressure President Trump into reopening the government. Delays in air travel were already becoming prevalent at some of the nation’s busiest airports due to the lack of TSA agents to get people through security in an expedient manner, but the nation’s air-dependent transportation system cannot function at all without the air traffic controllers so when they stop showing up for work, everything stops.

5. White House economic advisor Kevin Hassett said this week that the U.S. economy could see zero growth in the first quarter of 2019 due to the aftereffects of the partial shutdown of the government. Hassett is the chairman of the Council of Economic Advisers and noted that “If extended for the whole quarter, and given the fact that the first quarter tends to be low because of residual seasonality, then you could end up with a number very close to zero.” Hassett did note that if the government were to reopen fully then “the second quarter number would be humongous.”

6. The trade dispute between the U.S. and China continued to negatively impact the U.S. economy in addition to the government shutdown. Farmers have been forced to leave some soybean crops, in some cases as much as 40 percent of them, in the fields as demand for their product has dropped under heavy tariffs. Those crops are now beginning to rot and the ports that they are traditionally exported from have seen a significant drop-off in business not only in agricultural goods but industrial goods, such as steel, as well. According to one anti-tariff lobbying group, Tariffs Hurt the Heartland, Louisiana businesses paid more than eight times the duties paid on the same products just one year ago.

7. China’s economy grew at its slowest pace in 28 years last year, coming in at just 6.6 percent on an overall basis. The fourth quarter for China came in at 6.4 percent, down one tenth of a point from the previous quarter. Despite the weaker headline number, industrial output actually managed to grow by 5.7 percent in December, beating economists’ expectations and coming in ahead of November’s pace.

8. British Prime Minister Theresa May announced some revisions to the Brexit deal so carefully crafted by the EU and U.K. negotiators over the last many months in the hopes of winning over enough members of parliament to get the measure passed. May also shot down the prospect of a second referendum on whether the U.K. should exit the European Union, saying “The right way for this house to rule out ‘no deal’ is for this house to approve a deal with the European Union.” May said that she would continue to hold meetings on Brexit next week and hoped that Jeremy Corbyn, the Opposition leader, would hold discussions with her. Corbyn’s immediate response was to say that May’s cross-party talks have been a “sham”. If no consensus can be reached to pass an agreement, the U.K. will leave the EU on March 29 with nothing in place to govern trade, travel, or laws between itself and the EU.

9. Bank of England governor Mark Carney said on Thursday that the central bank has been forecasting the impact of a “no deal” Brexit since the results of the referendum became clear. Carney said, at the Word Economic Forum in Davos, Switzerland on Thursday, “From the day after the referendum we’ve been preparing for Brexit, no matter what form it takes. If you’re a central bank the easiest thing and the most important thing is to prepare for a hard Brexit with no transition. So that’s what we’ve been preparing the [financial] sector for.”

10. U.S. Crude oil climbed this week, settling in the mid-$50s on Friday as crisis erupted in Venezuela. The U.S. announced this week that it would recognize opposition leader Juan Guaido as interim president this week, refusing to recognize Nicholas Maduro’s claims that he fairly won the recent elections in Venezuela. Maduro, who claims that he was fairly reelected to the office promptly said he was going to cut ties with Washington and would act to expel any U.S. diplomats on Venezuelan soil. These actions gave a boost to oil prices despite a surge in U.S. fuel supplies and ongoing concerns over the state of the global economy.

11. The euro had a remarkably stable week for the most part, drifting sideways in a nearly flat line against the U.S. dollar all the way through late Wednesday evening. The euro saw a brief spike higher on Wednesday, moved sideways again through Thursday morning and then began a downward move that saw it reach its lows against the U.S. dollar by late Thursday night. The euro began recovering ground late Thursday, and the upward move accelerated the currency to its highs for the week by Friday’s close. The euro closed higher against the U.S. dollar for the week. The Japanese yen had a relative rollercoaster ride against the U.S. dollar this week. The yen moved in a tight band, drifting higher and reaching its highs against the U.S. dollar by Tuesday, before beginning a bounce between positive and negative territory for the rest of the week. Friday saw a surge, an immediate drop, followed by another surge that will place the yen in positive territory for the week against the U.S. dollar.

Despite an apparent compromise in the works over the partial shutdown of the U.S. government, we can still expect further ramifications from the lengthiest such shutdown on record. Many Federal workers, unable to cope with receiving no pay, have apparently found other employment during the shutdown to make ends meet. It is possible that some of these workers will not return to their jobs, or may be looking to find jobs in the commercial sector where such a scenario is less likely to take place.

Trump must still negotiate with the democratic party over the fate of his pet wall project in order for the government to remain even close to functional beyond mid -February so the likelihood of further gridlocks and even potentially another shutdown still looms large.

The U.S.-China trade dispute will now likely return to the top of the list of items that could affect market volatility. The two sides have yet to reach an agreement and reports of the U.S. perhaps easing some of the tariffs now in place while further negotiations take place have not been confirmed. The trade battle is beginning to have serious consequences for American exporters, particularly those with agricultural products, such as soybeans, may of which are now rotting, unsold, in fields.  China too has felt the effects of the trade dispute as the tariffs have apparently helped to accelerate an economic slowdown that appears to be well under way.

In Europe, concerns are growing that the United Kingdom will be exiting the European Union without an agreement in place to govern its trade, legal and travel between the two when the March 29 deadline arrives. Prime Minister Theresa May, whose draft Brexit agreement was resoundingly voted down in parliament, is doing her utmost to try to reassure the people of the U.K. that she can amend the draft agreement to make it more palatable. The European Union continues to stand by its assertions that the previous agreement will be the only agreement that is acceptable, so Ms. May could be fighting yet another losing battle.

The Bank of England has apparently been preparing for a “no deal” Brexit since day one according to its governor, Mark carney. It is looking more and more likely that the “no deal” scenario will be what takes place as the March 29 deadline approaches. Theresa May also adamantly refuses to hold another referendum that could reverse the decision to leave the EU.

As geopolitical and economic uncertainty continue to escalate, savvy investors have continued to take steps to diversify their portfolios to help protect them from the uncertainties in today’s world. Many of these investors have begun to return to the view that Gold represents a “safe haven” for their hard-earned cash that might assist them in keeping their portfolios diversified.

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. 18th2019Jan. 25th2019Net Change
Gold$1283.00$1298.9515.95 + 1.24%
Silver$15.37$15.690.32 + 2.08%
Platinum$799.30$815.9016.60 – 2.08%
Palladium$1376.10$1361.80(14.30) – 1.04%
Dow Jones24706.3524737.2030.85 + 0.12%

Previous Year Comparisons

Jan 26th2018Jan. 25th2019Net Change
Gold$1353.00$1298.95(54.05) – 3.99%
Silver$17.48$15.69(1.79) – 10.24%
Platinum$1016.50$815.90 (200.60) – 19.73%
Palladium$1092.50$1361.80269.30 + 24.65%
Dow Jones26616.7124737.20(1879.51) – 7.06%

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

GoldSilver
Support1280/1260/124015.60/15.25/15.00
Resistance1300/1320/136015.80/16.00/16.25
PlatinumPalladium
Support810/790/7601350/1325/1300
Resistance840/880/9101375/1400/1425

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

Leave a Reply

Your email address will not be published. Required fields are marked *