1. The ongoing trade dispute between the U.S. and China remained the main focus for mainstream media outlets this week. High-level officials from Beijing arrived in Washington, D.C. this week to recommence the negotiations over the ongoing trade war. Markets were surging on Friday on expectations that some sort of deal could be reached.

The Precious Metals Week in Review - October 11th, 2019.
The Precious Metals Week in Review – October 11th, 2019.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment plunged by 10,000 claims from the previous week’s revised level to a new level of 210,000 claims for the week ending October 5. The previous week’s level was revised higher by 1,000 claims. The four-week moving average increased by 1,000 claims from the previous week’s revised average and stood at 213,750 claims. The previous week’s moving average of claims was revised higher by 250 claims.

3. Political pressure on President Trump escalated further this week as the House of Representatives continued on its path towards impeachment. Two associates of Rudolph Giuliani, one of Trump’s legal advisors, were arrested this week on campaign finance charges. The indictment against the two accuses them of a scheme to make money and advance the political interests of at least one Ukrainian government official. The indictment also alleges that the two sought help from “a sitting congressman” to have Marie Yovanovitch, the U.S. ambassador to Ukraine, removed. Yovanovitch’s removal allegedly cleared the way for pressure to be placed on Ukraine to investigate the Biden family, which is, of course, the source of the President’s impeachment woes.

4. US Producer prices posted their biggest drop in eight months in September. The drop was unexpected and appeared to be driven by decreases in the costs of goods and services, despite the ongoing tariffs in place between the U.S. and China. The Producer Price Index dipped 0.3% in September, which was the biggest move lower since January. The dip means that inflation remains weak in the U.S. economy and it could give the Fed more ammunition to continue its path of rate cuts when it meets at the end of the month to determine the course of U.S. monetary policy.

5. In a speech on Tuesday, Federal Reserve Chair Jerome Powell said that the Fed would soon begin enlarging its balance sheet again, partly in response to events in the overnight lending markets that occurred in September. Powell stressed that the move should not be considered a new round of Quantitative Easing (QE), saying “This is not QE. In no sense is this QE” in a question and answer session that took place after his speech. Late in September, overnight repurchase markets “malfunctioned” when money was leaving the system as companies made tax payments and the Treasury Department settled bond auctions faster than it was being replenished. This event caused a spike in the Fed’s benchmark funds rate – the rate at which banks lend to each other – of 5 basis points. The Fed stepped in to address the issue by exchanging cash for so-called “ultra-safe” assets. Powell discussed the situation, saying “This volatility can impede the effective implementation of monetary policy, and we are addressing it. Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time.”

6. The ongoing protests in Hong Kong boiled over into American sports this week as Houston Rockets general manager Daryl Morey tweeted a message of support for the protestors in Hong Kong, saying “Fight for Freedom. Stand with Hong Kong.” Morey deleted the tweet and issued an apology, but the damage had already been done. The Chinese consulate in Houston expressed “strong dissatisfaction” with the tweet and said that “anybody with conscience would support the efforts made by the Hong Kong Special Administrative Region to safeguard Hong Kong’s social stability.” Sponsors also began to cut ties with both the Houston Rockets and the NBA overall. Ahead of a demo game played between American NBA teams in China this week, workers were tearing vinyl banners that were adorning high-rise buildings in advertisement for the upcoming game from the walls in response to the incident. The growing backlash also appears to be flowing into the electronic gaming industry which has begun to see similar incidents where freedom of speech in America is being sharply curtailed on fear of official responses from Beijing which could create financial hardships for American companies.

7. Turkey began a military offensive into northern Syria this week and President Trump has apparently given his administration the authority to issue sanctions in response. Treasury Secretary Steven Mnuchin said on Friday that “These are very powerful sanctions. We hope we don’t have to use them. But we can shut down the Turkish economy if we need to.” Many members of Congress have criticized Turkey’s move and fear that it could lead to the deaths of many U.S.-allied Kurdish forces, left essentially on their own to fight against the Islamic State after the U.S. recently pulled its troops out of northern Syria. On Wednesday, Senators Lindsey Graham of South Carolina and Chris Van Hollen, of Maryland announced a “framework” for sanctions, saying “This unlawful and unwarranted attack against an American friend and partner threatens the lives and livelihoods of millions of civilians, many of whom have already fled from their homes elsewhere in Syria to find safety in this region.”

8. A key meeting between the British and Irish prime ministers on Thursday apparently ended with both sides saying they believed a settlement over Britain’s departure from the EU was still achievable before the current October 31 deadline. The EU has apparently agreed to “intensify” its talks with the U.K. over the next several days ahead of a summit between EU leaders next week. That summit is now widely seen as the last chance for the U.K. and EU to agree on a deal before the approaching deadline.

9. Iran claimed that two missiles struck one of its oil tankers in the Red Sea on Friday morning roughly 60 miles off the coast of Saudi Arabia, sending oil prices moving higher on fears that tensions could escalate further in the Middle East. Brent crude was at $59.93 a barrel while West Texas Intermediate was hovering around the mid-$50 range. Despite the boost that fears of an escalation in the region brought about, oil prices were still lower for the week

10. The euro moved sideways in early trading as the week began but dipped into negative territory against the U.S. dollar by late Tuesday. The euro hit its lows for the week Tuesday evening and then began a march upward in a series of stepped surges that lasted through the rest of the week. The euro hit its highs for the week on Friday and will close out the week higher against the U.S. dollar. The Japanese yen bumped higher against the U.S. dollar at the start of trading for the week but immediately began a relatively steady move to the downside which, in spite of a couple of recovery attempts mid-week, lasted through the rest of the week. The yen hit its lows for the week on Friday and will close the week out lower against the U.S. dollar.

As markets drew to a close on Friday, analysts were eagerly awaiting news out of a meeting between President Donald Trump and China’s Vice Premier Liu He. Earlier in the week Trump told reporters that talks between the U.S. and China were going “really well”. An anonymous White House official told Reuters that Thursday’s talks between the two sides went “probably better than expected.” On Friday, Trump took to Twitter, saying:

Later in the day, Trump tweeted:

Despite the seemingly improved atmosphere surrounding the talks, a full-scale deal is not expected, which will likely mean that existing tariffs will remain in place. If the tariffs do remain, they could continue to put pressure on both the U.S. and Chinese economies ahead of the busy holiday shopping season. It is also worth noting that President Trump’s volatile nature could mean any deal reached this week would be tenuous, at best, until signed by both sides.

The ongoing protests in Hong Kong remain another factor that could derail a trade deal between the two countries as China continues to take offense at statements made over the ongoing struggle, punishing U.S. businesses over social posts made by their employees and/or officials. Even Apple, who has a long history of successful business in China, had to back down this week as it was forced to remove several apps from its stores that the Chinese government objected to.

Late in the day on Friday, President Trump said that the U.S. had come to a “very substantial phase one deal” with China in its negotiations. He went on to say, “Phase two will start almost immediately” after the first phase is drafted and signed, which is expected to take roughly three weeks.

Treasury Secretary Steven Mnuchin announced, almost simultaneously, that the additional tariffs that were to go into effect on more Chinese goods beginning October 15 would not be implemented as planned but did confirm that current tariffs will remain in place.

Turkey faced open criticism of its military incursion into Syria this week and President Recep Tayyip Erdogan threatened to unleash a flood of refugees into Europe if its leaders called the offensive an “occupation” of Syria. Erdogan said, “We will open the gates and send 3.6 million refugees your way.” Turkey has long wanted to wipe out the Kurdish military presence along its borders, seeing the group as an extension of a Kurdish terrorist group that operates inside Turkey. Erdogan says the goal of their current operation is to clear the border of “terrorists” and that he is only trying to secure a path that would allow the return of the millions of Syrian refugees residing in Turkey to go back home.

Middle East tensions escalated late this week as Iran announced that one of its oil tankers had been moderately damaged by two missiles just 60 miles off the coast of Saudi Arabia in the Red Sea in the early morning hours on Friday. The oil industry appeared to hold its collective breath as it waited to see if Iran would blame Saudi Arabia for the attack, but the usually belligerent government seemed willing to take its time to investigate what happened before placing outright blame on the Saudis.

Brexit talks are expected to ramp up over the coming days as EU leaders get ready to hold a summit in Brussels on October 17. The summit is perhaps the last chance that Britain will have to convince the EU that it has a workable agreement to govern its relationship with the bloc after the exit takes place. The current deadline for the U.K. would see it leave the EU on October 31 with or without an agreement in place, but the U.K. parliament is likely to force Prime Minister Boris Johnson to ask the EU for yet another extension if an agreement is not in place by October 19, following the upcoming summit. The tenuous “phase one” trade deal between China and the U.S. came late in the day on Friday, just as equity markets were closing.

Despite the positive news, stocks remained volatile, losing more than 200 points just half an hour prior to the close and then surging back as more details began to emerge just at the close. The details of the agreement will likely continue to trickle out over the weekend and those details could shift market sentiment in either direction when markets reopen in Asia on Sunday. There will likely be a surge of euphoria leading up to the signing of any trade deal as stock analysts lock in on the “good news” of a trade deal and ignore the ongoing signs that the global economy may be approaching another recession, with or without a trade deal.

As geopolitical and macroeconomic uncertainty escalates, investors continue seeking out ways to make sure that their portfolios are sufficiently diversified away from stocks, which remain at risk of collapsing should the economy enter a recessionary phase. Many investors have continued to accumulate physical precious metals, using temporary price dips as buying opportunities to acquire more physical product, as part of their plans to diversify their portfolios. Precious metals have long been viewed as a safe haven during times of economic turmoil and many investors view maintaining some physical precious metals as a portion of their investment portfolios a key part of their investing strategy.

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)

Oct. 4th2019 Oct. 11th2019 Net Change
Gold $1507.20 $1484.40 (22.80) – 1.51%
Silver $17.58 $17.52 (0.06) – 0.34%
Platinum $882.10 $895.50 13.40 + 1.52%
Palladium $1669.90 $1700.10 30.20 + 1.81%
Dow Jones 26573.48 26816.59 243.11 + 0.91%

Previous year Comparisons

Oct. 12th2018 Oct. 11th2019 Net Change
Gold $1222.00 $1484.40 262.40 + 21.47%
Silver $14.64 $17.52 2.88 + 19.67%
Platinum $840.00 $895.50  55.50 + 6.61%
Palladium $1060.80 $1700.10 639.30 + 60.27%
Dow Jones 25339.99 26816.59 1476.60 + 5.83%

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

Gold Silver
Support 1480/1460/1440 17.50/17.10/16.90
Resistance 1525/1550/1580 17.80/18.00/18.50
Platinum Palladium
Support 875/850/825 1690/1650/1620
Resistance 900/930/960 1710/1730/1750
This is not a solicitation to purchase or sell.
© 2019, Precious Metals International, Ltd.

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