The Precious Metals Week in Review – December 6th, 2019

1. The U.S.-China trade negotiation continues to be the top factor for market volatility. The impeachment inquiry into President Trump’s dealings with Ukraine also resumed this week, and it appears that the House will proceed with drafting formal articles of impeachment.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment plunged by 10,000 claims from the previous week’s unrevised level to reach 203,000 for the week ending November 30. The four-week moving average decreased by 2,000 claims from the previous week’s unrevised average and stood at 217,750 claims. We can continue to expect the unemployment data to be volatile, likely through February. The seasonal adjustment algorithms for employment have become outdated and inaccurate as consumers have shifted their shopping patterns out of traditional brick and mortar storefronts into online venues.

3. The November Non-Farm Payrolls Report was released on Friday and the number blew through economist’s expectations. Payrolls surged by 266,000 in November, adding nearly 80,000 more jobs than expected. The unemployment rate edged lower to 3.5%, matching the low for 2019 and the lowest rate since 1969. Roughly 54,000 of the jobs appeared to come from the automotive sector as GM employees went back to work following a prolonged strike earlier in the year.

4. House Speaker Nancy Pelosi announced on Thursday that the House of Representatives was proceeding with formal articles of impeachment against President Trump. The House Judiciary Committee has full authority to draft articles of impeachment and will vote on whether to draft and refer them to the full House itself. If the Judiciary Committee does vote to approve the articles, which is highly likely given Democratic control of the House, then another vote will take place, where only a simple majority is needed to impeach the president. If the House does impeach President Trump, the next step in the process will be a Senate trial, where it will be decided whether Trump should be removed from office. If the impeachment does reach the Senate trial phase, most analysts feel that it is highly unlikely that Trump will actually be convicted and removed from office by the Senate.

5. On December 15, the U.S. is supposed to implement another set of tariffs on $156 billion in Chinese goods. The trade negotiations between the U.S. and China are still underway, with no sign of the alleged “Phase One” deal between the two in sight so far. It has been two months since the latest cease-fire in the long-running trade war between the U.S. and China and if the president moves forward on the December tariffs, it would likely add further animosity to an already tense negotiation. China has continued to demand that the U.S. roll back existing tariffs more than it seems willing to do and adding further tariffs would likely add months to the ongoing negotiations, if not derail them completely. If President Trump opts to delay the additional tariffs however, it could weaken the U.S.’ negotiating leverage, triggering a request for even more concessions by China.

6. President Trump said he “liked the idea” of waiting until after the 2020 election next November to ink a trade deal between the U.S. and China. His remarks, made to reporters on the sidelines of the NATO summit in London, were backed up by Commerce Secretary Wilbur Ross later on Tuesday. Ross told CNBC’s “Squawk on the Street” program “That [waiting] takes off the table something that they may think gives them some leverage. Because once the election occurs and he’s back in, now that’s no longer a distraction that can detract from our negotiating position.” Ross continued, saying “The president’s objective always has been to get the right deal independently of when or anything else like that, so his objectives haven’t changed. And if we don’t have a deal, he’s perfectly happy to continue with the tariffs as we have.”

7. In France, a public strike involving reportedly more than 800,000 people kicked off on Thursday. The strike continued through Friday and some trade unions have called for the demonstrations to continue through the weekend. The strikes have disrupted transportation across all sectors and forced some schools to close as public sector workers took to the streets to protest reforms to France’s pension system.

8. Crude oil got a boost this week as OPEC and its allies, commonly called OPEC+ met in Vienna, Austria to discuss price support for the oil market. The cartel agreed to effectively cut production by an additional 500,000 barrels a day through March of 2020. Saudi Arabia, the largest producer of the cartel, continued to stress that other members and ally countries must comply with the agreement and not violate their quotas. Iraq and Nigeria have both been accused of overshooting their oil quotas and aggravating the global oversupply situation in defiance of current production limits. Brent crude was solidly in the mid-$60 a barrel range while West Texas Intermediate (WTI) attempted to broach the $60 a barrel mark.

9. The euro opened relatively flat against the U.S. dollar at the start of trading for the week and then shot higher Monday afternoon. The euro bounced along essentially sideways through Wednesday afternoon when it saw a short-lived spike higher. Late Wednesday evening the euro began a steady climb higher that lasted all the way through Friday. Just before the close on Friday the euro tumbled off its highs for the week, dropping sharply lower. The euro quickly halted its decline, recovering slightly as the market was closing and will still finish the week out higher against the U.S. dollar. The Japanese yen dipped briefly against the U.S. dollar as trading opened, but then began a fairly steep ascent that saw the yen touch its highs for the week on Wednesday afternoon. The yen reversed course, however, dipping shallowly against the dollar as Wednesday finished. The yen staged a recovery beginning Thursday and despite a sharp, but short-lived, dip on Friday will finish out the week higher against the U.S. dollar.

We enter the final month of the decade under a continued pall of uncertainty. The U.S. and China have yet to put pen to paper on their supposedly agreed upon “Phase One” trade deal. Negotiations between the two sides appear to remain contentious, with President Trump saying this week that he would not mind waiting until after November’s election takes place to make a deal with China.

The November Non-Farm Payrolls Report gave added support to the viewpoint that tariffs currently in place between the two sides are having little effect on the U.S. economy. Economists have been saying for months that the tariffs will likely push the U.S. economy into a full-blown recession and the data has yet to materialize to prove their points.

America’s farmers, as opposed to its apparently unfazed consumers, are definitely feeling the impact of the tariffs though, as the sales of their agricultural products into China have dropped significantly or, in some cases, disappeared altogether. In the absence of the “Phase One” agreement, the U.S. is slated to slap additional tariffs on another $156 billion in Chinese goods on December 15. Should those tariffs go into effect, without the possibility of being immediately rolled back, the trade negotiations between the U.S. and China could once again fall apart.

The impeachment inquiry into President Trump appears to be proceeding full speed ahead after this week’s hearings in front of the House Judiciary Committee. The Committee heard from a wide range of legal experts over whether the President’s actions in his phone call with the President of Ukraine fell under the definition of High Crimes and Misdemeanors. Speaker of the House Nancy Pelosi apparently believes that Trump’s actions satisfy the definition and announced on Thursday that the hearings had gathered enough evidence for the Judiciary Committee to begin drafting formal articles of impeachment. Trump was given until 5 p.m. on Friday to respond on whether he would appear in front of the Committee and when his response did finally arrive, it was in classic Trump fashion.

Trump said via Twitter:

…..trial in the Senate, and so that our Country can get back to business. We will have Schiff, the Bidens, Pelosi and many more testify, and will reveal, for the first time, how corrupt our system really is. I was elected to “Clean the Swamp,” and that’s what I am doing!

— Donald J. Trump (@realDonaldTrump) December 5, 2019

Trump continued, saying: “Therefore I say, if you are going to impeach me, do it now, fast, so we can have a fair trial in the Senate, and so that our Country can get back to business.” Trump continued, saying that he wanted Adam Schiff, the House Intelligence Committee chairman, former Vice President Joe Biden, Nancy Pelosi and “many more” to appear as witnesses in the Senate trial because they would “reveal for the first time, how corrupt our system really is.” In another tweet, Trump said: “I was elected to ‘Clean the Swamp,’ and that’s what I am doing!” It is widely expected that the Senate will not remove Trump from office and it still remains a very real possibility, given that the Democrat’s case is built almost entirely on hearsay and second-hand witness testimony, that the whole episode could backfire on the Democratic party come election time in November of 2020.

The U.K. continues to head towards its own elections this month and it seems to be growing more and more likely that Boris Johnson and his Conservative Party will win a majority in Parliament. The fate of Brexit hangs in the balance of the outcome of the coming election. If Johnson and the Conservative Party do win the day, the chance that the current draft of the Brexit agreement passes Parliament increase significantly. Johnson has pledged to push the current Brexit plan through and take the U.K. out of the European Union by the end of January if he wins.

The ongoing geopolitical uncertainty across the globe has led to wild swings in market volatility. Savvy investors continue to take steps to make sure that their portfolios are well-diversified and have continued to reduce their exposure to overinflated equity markets. Many of these investors have returned to the historical “safe haven” view of physical precious metals and have continued steadily accumulating product for the purpose of portfolio diversification whenever temporary price dips offer them the opportunity 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.

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