The Precious Metals Week in Review – November 29th, 2019

1. Despite the shortened trading week due to the Thanksgiving holiday in the U.S., and seemingly positive progress in the trade talks between the U.S. and China earlier in the week, uncertainty surrounding the U.S.-China relationship continues to be the primary driver for market volatility.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment plunged from the previous week’s revised level to reach a new level of 213,000 for the week ending November 23. The previous week’s data was revised higher by 1,000 claims. The four-week moving average decreased by 1,500 claims from the previous week’s revised average and stood at 219,750 claims. The previous week’s moving average of claims was revised higher by 250 claims. We can continue to expect the unemployment data to be volatile over the next couple of months as the holiday shopping rush shifts into high gear. The physical “brick and mortar” retail sector continues to show signs of stress as consumers shift their holiday spending to more and more online venues.

3. President Trump signed two bills that were written to show support for the protestors in Hong Kong into law on Wednesday, despite multiple objections from China. Trump said, in a statement released by the White House, “I signed these bills out of respect for President Xi, China, and the people of Hong Kong. They are being enacted in the hope that Leaders and Representatives of China and Hong Kong will be able to amicably settle their differences leading to long term peace and prosperity for all.” China released its own statement several hours later, heavily criticizing the move and defending its “one country, two systems” policy. In a statement released by the Hong Kong liaison office, officials for the region said “We are officially telling the U.S. and the handful of opposition politicians in Hong Kong who follow America’s lead to not underestimate our determination to protect Hong Kong’s prosperity and stability, don’t underestimate our belief to protect the ‘one country, two systems policy’ and don’t underestimate our capabilities and strategies in protecting our country’s sovereignty, safety, growth and rights.”

4. In further statements from China released after President Trump signed the two new bills supporting Hong Kong protestors into law, China’s Foreign Ministry in Beijing blasted the U.S. and called its intentions into question, saying “This so-called bill will only make the Chinese people, including our compatriots in Hong Kong, further understand the sinister intentions and hegemonic nature of the United States. It will only make the Chinese people more united and make the American plot doomed to fail.”

5. North Korea fired two short-range projectiles into the sea off its east coast on Thursday in another test of its multiple rocket launch systems. Pyongyang’s official news agency, KCNA, said that Kim Jong Un oversaw the “successful test”, saying “The volley test-fire aimed to finally examine the combat application of the super-large multiple launch rocket system proved the military and technical superiority of the weapon system and its firm reliability.” KCNA went on to say “The Supreme Leader expressed great satisfaction over the results of the test-fire.”

6. In the U.K. the upcoming General Elections continue to be the top news story. The Conservative Party still seems to be in the lead in the polls, but the Labour Party could still wind up gaining enough votes to require another coalition government to be formed, which could once again lead to gridlock in Parliament over Brexit. Everything could hinge on the results of Scotland’s portion of the election. Scotland has a strong desire for independence from the U.K. and its citizens primarily voted to remain in the European Union during the initial Brexit referendum.

7. Crude oil was fairly steady during the shortened trading week with Brent crude settling in the low $60-a-barrel range and West Texas Intermediate settling in the upper $50-a-barrel range. Trading was muted during the U.S. Thanksgiving holiday as investors look forward to a meeting between OPEC and its allies over a possible extension to the production cuts that it and its allies put in place to try to support prices. The group, known as OPEC+, hopes to enforce stricter compliance with its existing production cuts in addition to pondering the possible extension.

8. The euro moved essentially sideways against the U.S. dollar through the first part of the week, taking a gradual leg lower late Tuesday evening. By late Wednesday, the euro had reversed and was attempting to recover positive territory but a sudden downturn on Friday will ensure that the embattled currency will close at its lows for the week against the U.S. dollar. The Japanese yen spent most of the week drifting steadily lower against the U.S. dollar. The yen attempted a mild recovery late on Wednesday, but the recovery was short-lived. The yen drifted slightly lower through the rest of the week and will close out the week to the downside against the U.S. dollar.

As we enter the final month of 2019 and move towards the end of the decade, the world continues to anxiously watch the U.S.-China trade negotiations for signs of progress. President Trump’s signing of the two bills supporting Hong Kong protesters into law has added another layer of complexity to the ongoing trade talks. Beijing is furious over the legislation, accusing the U.S. of meddling in its internal affairs with regard to how Hong Kong should be handled.

The U.S. Congress has been on holiday recess all week for Thanksgiving, so the ongoing public impeachment hearings have essentially been on hold during the week. The hearings will resume next week and could also continue to add layers of complexity to the U.S.-China talks. The hearings will resume on Wednesday as Democrats in the House of Representatives charge ahead with their latest quest to remove President Donald Trump from power.

House Judiciary Chairman Jerrold Nadler, a Democrat from New York, sent a letter to Trump informing him that he is allowed to attend the hearings. Trump was not allowed to attend or participate in the hearings conducted by the House Intelligence Committee. The House rules on impeachment also allow the President’s legal counsel to appear and question any witnesses called forth. Wednesday’s hearing is primarily going to be legal experts who will discuss the U.S. Constitution and explore whether the President’s actions towards Ukraine warrant the House of Representatives adopting articles of impeachment against President Trump.

The House Intelligence Committee, led by Peter Schiff, has completed its round of hearings and, according to a letter issued by Schiff on Monday, is now “preparing a report summarizing the evidence we have found this far.” Schiff’s report will be sent to the Judiciary committee sometime next week, but it was not clear from his letter whether the report would be ready before Wednesday’s hearing.

As we enter the end of the year, the ongoing and global geopolitical uncertainty will likely continue to cause volatility across all markets. One key factor to watch will be retail sales, particularly in the U.S. as analysts watch for signs that consumers are holding back in their holiday spending habits this year. The retail sector continues to show signs of weakness and since the U.S. consumer is the primary contributor to the nation’s Gross Domestic Product (GDP), a pullback in spending could be the first indicator of a coming recession for that nation.

As the uncertainty persists, savvy investors continue to diversify their portfolios to product them from a sudden downturn in equity markets. Many of these investors continue to acquire physical precious metals for portfolio diversification, using temporary price dips as buying opportunities to acquire more products.

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.

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