1. The U.S.-China trade war continued to be the primary driver for market volatility this week. The Hong Kong protests remain a thorn in the side of Beijing as the pro-democracy demonstrations expand. Chinese troops have moved closer to the region, ostensibly in a previously planned maneuver that has nothing to do with the protests, but with more pro-democracy demonstrations planned for the weekend the world will be closely watching to see how Beijing handles the situation.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment increased by 4,000 claims from the previous week’s revised level to a new level of 215,000 claims for the week ending August 24. The previous week’s level was revised higher by 2,000 claims. The four-week moving average of claims saw a net 0 increase after factoring in revisions to the previous week’s average and remained at 214,500 claims. The previous week’s moving average of claims was revised higher by 500 claims.
3. Gold prices continued to see support this week although investors don’t yet seem to have fully committed to purchasing physical Gold as a safe haven play. Much of the recent buying activity and its accompanying price rise is being attributed to short liquidations in September futures contracts as futures and options investors shift their positions into December contracts. Central banks, particularly in China and Russia, continue to acquire Gold as they seek to diversify their reserves away from the U.S. dollar.
4. Both China and the U.S. are slated to slap additional tariffs on each other’s goods beginning this weekend as their trade talks remain at a standstill. The American and Apparel Footwear Association reports that nearly 92% of apparel, nearly 70% of home textiles and over half of footwear imports from China will see a tariff of 15% beginning Sunday. American retailers such as Best Buy, Home Depot and Macy’s have reportedly already begun taking steps to move factories and/or suppliers and vendors out of China to help avoid having to pass tariff costs on to their customers.
5. President Trump took to Twitter again this week to level more criticism at both the Federal Reserve as well as some American companies, saying:
If the Fed would cut, we would have one of the biggest Stock Market increases in a long time. Badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management…and who can really blame them for doing that? Excuses!
— Donald J. Trump (@realDonaldTrump) August 30, 2019
Trump further elaborated on Twitter, saying:
The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage…and the Fed does NOTHING! Our Dollar is now the strongest in history. Sounds good, doesn’t it? Except to those (manufacturers) that make product for sale outside the U.S.
— Donald J. Trump (@realDonaldTrump) August 30, 2019
….We don’t have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!
— Donald J. Trump (@realDonaldTrump) August 30, 2019
6. The Caribbean and the east coast of Florida in the United States are both bracing for the arrival of Hurricane Dorian, the first major storm of this year’s hurricane season. The slow-moving storm is being described as “a monster” with Florida’s governor urging residents on Friday to secure at least a week’s worth of food, water and medicine in preparation for a “multiday event.” Florida is still reeling from the destruction that Hurricane Michael wrought on the Gulf Coast area last year and a multiday event that could wreak similar devastation on its East coast will surely do significant harm to the state’s economy, as well as to the economies of Florida’s surrounding states, Georgia and Alabama.
7. On Friday, China’s Ministry of Commerce said that U.S. and Chinese trade negotiators are maintaining “effective communication” in their talks. Gao Feng, spokesman for the Ministry, also said “We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude.” Responding to questions about President Trump’s comments earlier in the week that China had made some phone calls “over the weekend” with the desire of reaching a deal sooner, Gao said “At present, there have been quite a lot of all kinds of sayings. In the area of economics and trade, we will clarify the facts and let everyone understand the truth.”
8. Analysts spent the week trying to explain why “this time it’s different” with regards to the closely watched and inverted 10-year/2-year Treasury note yields. Ron Insana, a frequent CNBC contributor was one of the few voices to come out and explain why this yield curve inversion is not, in fact, different from the previous inversions that have been stunningly accurate harbingers of recession over the last 50 years. In an opinion piece titled “This time is not different for the inverted yield curve” on CNBC this week, Mr. Insana notes in great detail why those analysts and officials who are desperately trying to dismiss the yield curve inversion as a false signal of recession are likely mistaken. Our favorite takeaway from Mr. Insana’s article may just be the last two sentences: “Rationalize all you want, but this time is not different. Anyone who says so has some stocks they’d like to sell you.” Mr. Insana’s article is well worth the time it takes to read it.
9. Hedge fund billionaire Ray Dalio, founder of Bridgewater Associates, warned this week that the staggering levels of existing global debt and the failure of central bank’s monetary policies to boost their economies and the growing trade battle between the U.S. and China are all key factors to watch as the likelihood of a recession grows. In a wide-ranging LinkedIn post on Thursday, Mr. Dalio said “If/when there is an economic downturn, that will produce serious problems in ways that are analogous to the ways that the confluence of those three influences produced serious problems in the late 1930’s.”
10. The odds that the United Kingdom will leave the European Union in a hard “Brexit” grew suddenly, and unexpectedly, greater this week as Prime Minister Boris Johnson pulled out what some are calling the “nuclear option” and called upon the Queen to suspend Parliament. The Queen approved the move, and noted that Parliament will be suspended, also called “proroguing”, beginning some time between September 9 and 12 and will not return until October 14. On October 14, Prime Minister Johnson will deliver a so-called “Queen’s Speech”, setting out his government’s legislative agenda. The move leaves only two weeks for Parliament to come to terms with a Brexit deal before the October 31 deadline when the U.K. will likely be forced into a “hard exit” from the European Union. The unexpected move by Johnson is clearly designed to foil those MP’s who are still looking to block the “Brexit” and is being called a “coup” and a “constitutional outrage” by many in both the U.K. and the EU as a whole.
11. Crude oil managed to maintain its levels for the week, with Brent crude closing at $60.43 a barrel while West Texas Intermediate was at $55.10 a barrel. Hurricane Dorian appears that it will avoid the Gulf of Mexico, but some of the price support for oil could be due to cautious analysts projecting some shutdowns within the region should the storm suddenly change course and head in the direction of Gulf refineries.
12. The euro began the week with a brief pop to the upside against the U.S. dollar but quickly began heading downward and moved steadily lower throughout the rest of the week. On Friday the euro plunged below 1.10 per U.S. dollar for the first time in years as the growing likelihood of a hard Brexit sent shockwaves through Europe. The euro rebounded slightly just before the close but will still close out near multi-year lows for the week. The Japanese yen spiked at the start of trading for the week, but it too quickly began moving downward as the week wore on. The yen took a brief pause, moving sideways against the U.S. dollar through Thursday when it resumed its fall. Late Thursday the yen began moving higher once more but will still close out the week slightly lower against the U.S. dollar.
As tariffs on both sides of the trade dispute go into effect this weekend, the key negotiations between China and the U.S. remain the primary worry for markets. The shortened week in the U.S. due to the Labor Day holiday, and the oncoming threat of Hurricane Dorian may act to delay any immediate news on the U.S.-China trade dispute until later in the week. Key economic data around the globe seems to be coming in weaker than expected. Despite claims that the U.S. economy will “take off like a rocket” if the Federal Reserve would only cut rates faster, the signs of economic turmoil around the world, including in the U.S., seem to be growing. While the ongoing trade dispute between the U.S. and China is surely a factor in the weakening outlook for the global economy, it is also certainly not the sole cause of the global slowdown.
Hedge fund manager and Bridgewater Associates founder Ray Dalio, in his wide-ranging LinkedIn post titled “The Three Big Issues and the 1930s Analogue” details exactly why he thinks central banks will be out of ammunition when the next recession arrives.
In the U.K., Prime Minister Boris Johnson asked the Queen to suspend parliament through most of September and October in a move that appears designed to almost certainly lead to a “no-deal” or “hard” Brexit. The Queen agreed to the request and the suspension will occur sometime between September 9 and 12. On October 14, Johnson will give a Queen’s Speech in which he will lay out the legislative goals for his government, leaving only 14 more working days for Parliament to come to an agreement on a Brexit deal prior to the October 31 deadline. Many across Europe are calling Johnson’s move a “coup” and a “constitutional crisis.”
One U.K. lawmaker filed suit in a Scottish court to block the order to suspend Parliament, but the request was rejected on Friday. Joanna Cherry, the lawmaker who made the attempt said that “Court refuses interim orders at this stage but indicates a willingness to hear full arguments early next week. So there is no decision on merits as yet on our attempt to halt prorogation. That will happen next week.” Prorogation is the legal term for Johnson’s move to suspend Parliament.
Jeremy Corbyn, leader of the opposition Labour party, said in a statement that he was “appalled at the recklessness of Johnson’s government which talks about sovereignty and yet is seeking to suspend parliament to avoid scrutiny of its plans for a reckless No Deal Brexit. This is an outrage and a threat to our democracy.” Corbyn further said that if Johnson has so much confidence in his plans, he should “put them to the people in a general election or public vote.” Nicola Sturgeon, the Scottish National Party leader and First Minister of Scotland tweeted:
So it seems that Boris Johnson may actually be about to shut down Parliament to force through a no deal Brexit. Unless MPs come together to stop him next week, today will go down in history as a dark one indeed for UK democracy. https://t.co/68lFnEgiyr
— Nicola Sturgeon (@NicolaSturgeon) August 28, 2019
The skirmishes, it seems, are just beginning in the U.K.’s long road to exiting the European Union.
In Argentina, there is growing fear that a full-fledged financial crisis is underway once again. Analysts warned that South America’s second-largest country could soon see its ninth sovereign default after President Mauricio Macri pledged to “re-profile” nearly $100 billion in debt this week. Standard & Poor’s immediately lowered Argentina’s long-term credit rating into the deepest of junk debt territory, saying Macri’s plan to “unilaterally” extend the maturities of Argentina’s short and medium-term debt essentially constituted a default.
As economic and geopolitical uncertainty escalate further, investors continue seeking out ways to make sure that their portfolios are diversified against a downturn in the global economy. Recognizing that a plunge in stocks could spell disaster for an overexposed portfolio, many investors have sought out assets are already viewed as “beaten down” to acquire for their portfolios at a discount. As precious metals prices remained suppressed over the last several years, mining operations have shuttered mines to try to cut costs. Many investors, recognizing that the supply of precious metals would be reduced by such a move, followed a plan of steadily accumulating physical precious metals for the purpose of diversifying their portfolios against overexposure to a stock market that appeared to be rising into bubble territory. The recent escalation of geopolitical and macroeconomic instability has served to reinforce the historical view that precious metals such as Gold and Silver may act as safe-haven assets in times of turmoil.
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.
Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
|August 23rd2019||August 30th2019||Net Change|
|Gold||$1527.95||$1520.70||(7.25) – 0.47%|
|Silver||$17.44||$18.24||0.80 + 4.59%|
|Platinum||$853.20||$928.60||75.40 + 8.84%|
|Palladium||$1461.80||$1546.70||84.90 + 5.81%|
|Dow Jones||25628.90||26403.28||774.38 + 3.02%|
Month End to Month End Close
|July 31st2019||August 30th2019||Net Change|
|Gold||$1425.50||$1520.70||95.20 + 6.68%|
|Silver||$16.39||$18.24||1.85 + 11.29%|
|Platinum||$875.25||$928.60||53.35 + 6.10%|
|Palladium||$1529.40||$1546.70||17.30 + 1.13%|
|Dow Jones||26864.27||26403.28||(460.99) – 1.72%|
Previous year Comparisons
|August 31st2018||August 30th2019||Net Change|
|Gold||$1200.90||$1520.70||319.80 + 26.63%|
|Silver||$14.52||$18.24||3.72 + 25.62%|
|Platinum||$788.10||$928.60||140.50 + 17.83%|
|Palladium||$977.90||$1546.70||568.80 + 58.17%|
|Dow Jones||25964.82||26403.28||438.46 + 1.69%|
Here are your Short Term Support and Resistance Levels for the upcoming week.