The Precious Metals Week in Review – May 17th, 2019

1. The collapse of the trade talks between the U.S. and China was the primary driver for stock market moves this week. Ongoing uncertainty over the Brexit negotiations was also a factor in market volatility as well as increased tensions in the Middle East.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 16,000 claims to a level of 212,000 from the previous week’s unrevised level of 228,000 for the week ending May 11. The four-week moving average of claims increased by 4,750 claims to reach a new level of 225,000. The previous week’s moving average was also unrevised.

3. China retaliated against the U.S. for hiking its tariffs to 25% on $200 billion worth of Chinese goods last week by hiking its own tariffs on $60 billion worth of U.S. products on Monday. Monday night, announcer Kang Hui said on Beijing’s CCTV 7 pm news show (according to a CNBC translation of his comments), “Regarding the trade war instigated by the U.S. side, China made its attitude clear early on: Unwilling to fight, but not afraid to fight; must fight when necessary. (If the U.S. wants to) talk, our door is wide open; (if the U.S. wants to fight), we will accompany to the end. Having experienced more than 5,000 years of disturbances, what kind of battle formation have the Chinese people not seen?”

4. On Wednesday, President Trump declared a national emergency over threats against American technology. The U.S. Department of Commerce announced that it had added Huawei Technologies and its various affiliates to the Bureau of Industry and Security’s Entity List shortly after Trump’s announcement. The move means that U.S. businesses will now need to acquire a license to sell or transfer any technology to Huawei, making it difficult for the China-based telecom company to do business with U.S. companies. China’s Commerce Ministry immediately responded, saying “We ask the U.S. to stop further actions, so Chinese companies can have a more normal environment to trade, to avoid further escalation of U.S.-China trade tensions.”

5. In other tariff news, the U.S. reportedly reached a deal on lifting tariffs on steel and aluminum for Canada and Mexico, perhaps as early as Friday. Those duties have been a major stumbling block on attempts to reengineer the decades-old North American Free Trade Agreement (NAFTA). Early on Friday, the Trump administration also announced that it was postponing potential tariffs on autos for up to 6 months as it tries to reach trade agreements with both the European Union and Japan.

6. Talks between the two largest political parties in the United Kingdom to try to hash out a Brexit deal that would be able to pass parliament broke down this week. Senior leaders between the Conservative Party and the Labour Party have been in talks for six weeks and have ended in a stalemate once again. Jeremy Corbin, the leader of the Labour Party, sent Prime Minister Theresa May a letter on Friday stating that the talks had “gone as far as they can go” and that Labour would now stand opposed to her Brexit deal. Corbyn added that “The increasing weakness and instability of your government means there cannot be confidence in securing whatever might be agreed between us.”

7. Iran rattled its sabers this week when a deputy head of its Revolutionary Guards said that the Middle Eastern country could “easily” hit U.S. warships in the Gulf. Iran’s foreign ministry rejected accusations from Saudi Arabia this week that Tehran had ordered an attack by Yemen’s Houthi militia on Saudi oil resources over the weekend.

8. Oil prices managed to eke out weekly gains despite the ongoing trade feud between the U.S. and China. Rising tensions in the Middle East acted to lend support to oil as concerns that there may be a disruption in supply escalated. Last Sunday, four tankers, including two Saudi ships, were attacked by Houthi rebels allegedly supported by Iran’s Revolutionary Guards. The Saudi’s immediately retaliated with air strikes in the Houthi-held capital of Yemen, Sanaa. Stephen Innes, the head of trading and market strategy at SPI Asset Management, told Reuters by e-mail that “When tensions are this high, with the U.S. deploying a sizable military force, even a mistake or a tactical error by Iran could ignite the Middle East powder keg.”

9. The euro drifted sideways against the US dollar at the start of trading for a week, spiking briefly higher late on Monday before dropping back near its opening level. On Tuesday the euro took a plunge lower, but had levelled off and begun moving sideways again by Tuesday afternoon. The euro saw another brief dip to the downside on Wednesday, but quickly recovered to Tuesday’s levels and actually drifted higher into Thursday’s trading. The euro began a fairly steady decline against the US dollar on Thursday, which continued through Friday. The euro appears set to close out the week lower against the US dollar. The Japanese yen spiked higher against the US dollar at the start trading for the week and then took a brief pause on Monday before jumping to its highs for the week around mid-day. The yen returned to Monday’s early morning levels by Tuesday and drifted sideways into Wednesday’s trading. Wednesday morning the yen jumped higher but quickly began dropping and had reached near-lows for the week by Friday morning. In Friday’s trading, the yen jumped higher again, but quickly reversed course and appears set to close out the week to the downside against the US dollar.

The deteriorating trade relationship between China and the U.S. remains the primary factor to watch as we enter another weekend under a cloud of uncertainty. China retaliated against the U.S.’ move to hike tariffs this week by placing additional duties on roughly $60 billion worth of U.S. goods on Monday. Official news outlets in China also have been making efforts to drum up local support for holding out against any further demands the U.S. might make in its negotiations by spinning the ongoing issues as just another example of U.S. bullying of Beijing.

In further, and somewhat unexpected, developments regarding U.S. trade policy this week, the U.S. announced that it would postpone any introduction of tariffs on automobiles for up to 6 months while it attempts to negotiate trade deals with the European Union and Japan.

The U.S. also announced that it had reached a deal on lifting tariffs on aluminum and steel for Canada and Mexico, a move which Canada viewed as a win in its efforts to have a greater say in the renegotiation of the replacement of the North American Free Trade Act (NAFTA). The ongoing tariffs were one of the largest hurdles preventing the ratification of the newly negotiated United States-Mexico-Canada Agreement (USMCA) which will ostensibly replace NAFTA.

In Europe, confusion still reigns over the ongoing efforts to negotiate a Brexit deal that the U.K. parliament can live with. Talks between the U.K.’s two largest political parties fell apart this week and Jeremy Corbin, of the Labour Party, now seems to be content to simply bide his time until Prime Minister Theresa May is essentially forced out of office. What had been viewed as a near certainty – that the U.K. would exit the European Union one way or another, regardless of whether a deal was in place or not – has once again been cast into doubt. Parliament seems perfectly happy to ignore the original will of the people and may be considering an attempt to place the matter of the U.K.’s membership in the EU up for yet another referendum. Such a move could throw the politics of the whole region into complete chaos.

As a final concern, the Middle East appears poised to erupt into violence once more as Iran’s Revolutionary Guards continue to flex their muscles. Saudi Arabia blames the elite unit for attacks on 4 oil ships over the weekend, saying that the group has lent its full support to the Houthi rebels in Yemen that carried out the attack. The U.S. has repeatedly said that it does not want to involve its troops in yet another war in the region, but continued unrest between Iran and its neighbors could result in a boost in the number of U.S. troops in the region.

As macroeconomic and geopolitical certainty continues to grow, savvy investors remain committed to ensuring that their investment portfolios are diversified from overexposure to any single asset class. Many of these investors have opted to purchase physical precious metals as prices have remained suppressed at their current levels, with the view that precious metals have historically acted as a “safe haven” in times of pronounced economic stress and that the best time to buy them for that purpose is when prices are low.

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.