The Precious Metals Week in Review – March 22nd, 2019

1. The uncertainty surrounding Brexit continues to be a top news item to watch, particularly as signs increase that a global recession may be building up steam.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 9,000 claims to a new level of 221,000 for the week ending March 16. The previous week’s level was revised higher by 1,000 claims. The four-week moving average of claims increased by 1,000 claims to reach a new level of 225,000. The previous week’s moving average was also revised higher by 250 claims.

3. The Federal Reserve held its Federal Open Market Committee meeting to determine monetary policy this week and opted to keep interest rates unchanged. The Fed also announced that it was revising its projected path of interest rate hikes and would not conduct any further rate hikes in 2019. The news that further interest rate hikes were on indefinite hiatus immediately sparked concern among market analysts that the Fed might be seeing further sluggishness ahead for the global economy. Further slowdown in the global economy would obviously trickle down into the U.S. economy, renewing pressure on the Fed to cut rates instead of hike them further.

4. Venezuela’s ongoing electricity crisis could trigger a “serious disruption” to the oil market according to the International Energy Agency (IEA). The power failure had become nationwide prior to Tuesday’s partial restoration of service and the IEA said that the crisis has “paralyzed most of the country for significant periods of time.” The group went on to say that OPEC could likely offset any significant impact to Venezuela’s oil output, but the stark reality of the report shows that the humanitarian crisis in Venezuela is becoming worse by the day.

5. The European Union is growing increasingly frustrated with the United Kingdom as Prime Minister Theresa May again failed to secure enough votes in parliament for the Brexit deal that her government negotiated with the other 27 members of the EU. Ms. May requested a three-month delay in the execution of Article 50, which was due to go into effect on March 29, the Day the UK was originally supposed to begin its exit. The request must be approved and agreed upon by the other 27 member states of the EU and, at this point, it is completely uncertain whether the other members are ready to agree to such an extension. Ms. May said that she intends to bring the agreement before parliament for a third time despite Speaker John Bercow, of the House of Commons, saying that her deal would need to be “fundamentally different” from the existing plan in order for another vote to be held.

6. Later in the week, the 27 other member states of the EU agreed to extend Britain’s exit deadline to May 22… if Theresa May can convince parliament to accept the existing deal that has now been voted down twice. Should Ms. May fail to convince parliament that the deal is acceptable, the other members of the EU said that the U.K. would face a “disorderly exit” from the EU on April 12. The group did not seem inclined to negotiate any “fundamentally different” deal that parliament might approve of.

7. Stephen Roach, a senior fellow at Yale University, told CNBC on Friday that with all of the uproar over Brexit, the very existence of the European Union as we know it could be thrown into question. Mr. Roach said “You have to wonder about the future of the European Union itself…this is an imperfect union and the survivability of it is, I think, a serious question.” Mr. Roach went on to note that the EU is still attempting to recover from the global financial crisis after more than a decade and that the exit of the

8. The German 10-year bond yield went negative this week, for the first time since 2016, as fears that a global recession could be in the making continued to grow. Germany’s PMI numbers were highly disappointing when they were revealed this week. Combined with France’s numbers, which were also abysmal, and Italy’s ongoing issues, some of the largest economies in the EU appear to be headed for further downside risk.

9. The Bank of England opted to hold its interest rates steady at the conclusion of its monetary policy meeting this week, just as the U.S. Federal Reserve did, in light of the escalating uncertainty surrounding the U.K.’s upcoming exit from the EU. The extension that the EU granted Britain for Theresa May to make one last attempt to get an exit deal passed does not leave much room for an orderly exit to occur.

10. Crude oil fell from its 2019 highs this week. West Texas Intermediate (WTI) fell by 1.6% on Friday to close at $59.04-a-barrel and Brent Crude, the international benchmark for oil prices, closed at $66.96, down 1.3 percent. The crisis in Venezuela and the ongoing trade disputes between the U.S. and its allies also have analysts concerned that demand for Crude could fall further as we move into Spring.

11. The euro began the week drifting higher against the U.S. dollar, climbing slowly until Wednesday, following the Fed meeting. When the news broke that the Federal Reserve was putting its interest rate hikes on hold for the rest of the year sent the euro surging vertically higher. The momentum did not last and following further confusion over the U.K.’s Brexit deal, the euro was soon taking a sharp turn back to the downside. A steep plunge on Friday sent the euro to its lows for the week and ensured that it will close out the week lower against the U.S. dollar. The Japanese yen also began the week drifting higher against the U.S. dollar, taking a brief pause ahead of the Fed meeting on Wednesday, but surging to the upside immediately after the Fed’s announcement. The yen drifted sideways into Friday’s trading, but a jump to the upside will see the yen close out the week higher against the U.S. dollar.

Brexit will continue to be the key news item to watch as U.K. Prime Minister Theresa May makes one last desperate attempt to get the deal that her government negotiated with the European Union pushed through parliament. The EU has given Britain an extension to Article 50 until May 22, but if Prime Minister May cannot secure a “yes” vote before early April then the other 27 members of the EU have agreed that the UK must make a “disorderly exit” from the bloc on April 12. Ms. May’s deal has been voted down twice already and the Speaker of the House of Commons informed her this week that he would not allow another vote on the package unless Ms. May brings a “fundamentally different” version before the House than the current plan.

Germany and France both released economic data this week that was weaker than expected. The Producer’s Manufacturing Index for both countries was disappointing and stoked fears that the ongoing global economic slowdown may soon become a full-fledged global recession.

The U.S. is likely the only economy that is in any kind of shape to face another recession, having been the only country who’s Central Bank has been steadily raising rates over the last several years. Despite the past rate hikes, the Fed’s balance sheet is nowhere near “normalized” and rates are far below where they could be, or even should be, given the length of the so-called “recovery” that the U.S. economy has been undergoing.

As signs that a global recession may be approaching increase, wise investors continue to seek out ways to attempt to keep their investment portfolios diversified against a sudden shock in global equity markets. Many investors have been seeking out alternative asset classes that have been “beaten down” as stocks have made their record run over the last several years. One such “alternative asset” is precious metals, and many contrarian investors have continued to acquire physical precious metals as price dips have presented them with additional buying opportunities to do so.

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)

Previous year Comparisons

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

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