The Precious Metals Week in Review – December 20th, 2019

1. It was a historic week as the U.S. House of Representatives voted to impeach just the third sitting president since the United States of America formed as a republic.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment dropped by 18,000 claims from the previous week’s unrevised level to 234,000 for the week ending December 14. The four-week moving average increased by just 1,500 claims from the previous week’s unrevised average and stood at 225,500 claims. We can continue to expect the unemployment data to remain volatile through the end of December and into the following months.

3. The full House of Representatives, led by the Democrats, held its vote on the two articles of impeachment against President Trump that the Judiciary Committee drafted, voted on and forwarded to the full floor last week.

The House overwhelmingly voted to adopt the articles as written, with no amendments however not a single Republican voted in favor of adopting the articles and three Democrats actually broke ranks. The entire impeachment process has been marred by partisan bickering and politics and the final voting result was no different. House Speaker Nancy Pelosi had to “shush” her party, like a stern mother, after announcing that the first article had been adopted. Rumor has it that the Democrats were high fiving each other off-camera later for having pulled off the quest to impeach Trump that they began years ago.

The next step in the process would normally be that the House would present the articles of impeachment to the Senate, where a trial would be conducted in order to determine if the President should be officially removed from office. That step, however, is not going to happen… at least not before the end of the year, apparently. House Speaker Nancy Pelosi said she would not forward the articles to the Senate until the House could determine whether a fair, non-partisan trial will be held there.

The unprecedented move not to forward the articles will likely mean that the Senate trial will be delayed into late January. The behavior of the Democratic party throughout these proceedings has been questionable, at best, and almost no one thinks President Trump will be removed from office when the trial finally happens. It is entirely possible that the impeachment process, which has made many of the members of the Democratic party appear partisan and petty and brought out some questionable behavior that likely violates most ethics codes, will backfire on them come election time in November. Throughout the entire impeachment process, President Trump’s approval rating has continued to climb and even other nations appear to view his impeachment as a sham based on fabricated evidence.

4. Despite being mainly focused on the impeachment of Donald J. Trump, the House of Representatives did manage to get some actual work done. The House passed the USMCA – The United States-Mexico-Canada Agreement – which is slated to replace the decades-old NAFTA legislation governing free trade between Canada, the U.S., and Mexico. The agreement now moves to the Senate, which is anticipated to approve the new legislation in the coming year and send it on to the President’s desk for signature into law.

5. The U.S. followed through on its promise not to implement additional tariffs on Chinese goods on December 15th, as part of its forthcoming agreement to a “Phase One” trade deal. On Friday, President Trump tweeted:

Had a very good talk with President Xi of China concerning our giant Trade Deal. China has already started large scale purchaes of agricultural product & more. Formal signing being arranged. Also talked about North Korea, where we are working with China, & Hong Kong (progress!).

— Donald J. Trump (@realDonaldTrump) December 20, 2019

Treasury Secretary Steve Mnuchin told reporters that the Phase One agreement was “just going through what I would consider to be a technical, legal scrub, and we’ll be releasing the document and signing it in the beginning of January.”

6. The U.S. Federal Reserve held its final Federal Open Market Committee meeting for the year last week and opted to leave interest rates unchanged as we close out the decade. The central bank also seemed to signal that it would not be raising interest rates at all in 2020, saying that it did not expect any policy changes next year.

7. U.K. Prime Minister Boris Johnson put his Conservative Party’s new-found majority to the test on Friday. Lawmakers approved his amended Brexit bill, agreeing to the legislature in principle and sending it on to be debated further in both chambers of Parliament at the start of the new year. 358 MPs voted to approve the bill while 234 voted against it. The bill will likely pass but contains some controversial items. The bill would outlaw any extension to the U.K.’s transition period which goes to December of 2020 and would allow additional U.K. courts to reconsider laws that were made by the European Court of Justice. If the bill passes into law in early January, then the U.K. would officially exit the EU on January 31. The short transition period in which the U.K. will have to negotiate a new trade agreement with the wider EU is now seen as the primary risk to a “No Deal” Brexit occurring.

8. Scotland’s First Minister Nicola Sturgeon announced on Thursday that she is sending a letter to the U.K. Prime Minister requesting that Parliament grant its counterpart in Scotland the right to hold another referendum on Scotland’s independence from the U.K. Sturgeon told reporters “We are a nation, no better or worse than any other… As a nation, our future, whatever we choose that to be, must be in the hands of the people that live here.” Boris Johnson has indicated that he will reject any new calls for Scottish independence.

9. Crude oil managed to close higher for the third straight week on continued optimism over the U.S.’ trade tactics. The easing of tensions, particularly between the U.S. and China seems to have boosted business confidence, leading oil analysts to predict an upsurge in demand for crude. Brent crude, the international benchmark, settled at $66.06 per barrel while U.S. West Texas Intermediate crude maintained its level above the $60 mark, settling at $60.44 per barrel.

10. The euro began the week climbing higher against the U.S. dollar and touching its highs for the week on Tuesday around mid-day. The euro reversed course late Tuesday, embarking on a shallow move lower over the next couple of days. The euro attempted to stage a recovery on Thursday but could not maintain the upward move and a sharp drop lower as the market neared closing on Friday will ensure that the euro finishes out the week lower against the dollar. The chart for the Japanese yen looked like an EKG this week. The yen started out moving shallowly lower, but then saw a series of spikes and dips that saw the yen move into positive territory against the U.S. dollar late on Thursday. The yen did not maintain its upward momentum however, and another series of spikes and dips narrowly moved it back into negative territory just before the close on Friday.

As we near the end of the decade, we can likely expect markets to be relatively quiescent as traders begin taking their holiday breaks. The impeachment of President Donald J. Trump seems to have had positive effects on stocks, rather than casting any shadow of uncertainty as many analysts had feared. The legal maneuvering of the House of Representatives in refusing to transmit the two articles of impeachment that it adopted against President Trump to the Senate so that a formal trial can begin likely means more gridlock in Congress next year. The Senate had cleared its calendar for the entire month of January in expectations that the Democrat-controlled House would vote to impeach the President and that it would be conducting a trial at the start of the year. That January timeline is now in question as no trial can officially begin without the House transmitting the articles of impeachment that it voted to adopt over to the Senate.

For the first time in its history, the United States of America appears to be on track to have both begun and ended a decade without a recession. Many analysts have said all year, and continue to say, that equity markets are now long overdue for a correction and that the economy is now overdue for a recession, but substantial progress on the U.S.-China trade dispute seems to have alleviated those near-term recessionary fears.

The passage of the USMCA trade agreement between the U.S., Mexico, and Canada in the U.S. House of Representatives also bodes well for global trade. The USMCA now moves to the Senate where it is expected to pass and be sent to the President’s desk for signing into law.

In Europe, Prime Minister Boris Johnson and his Conservative Party’s landslide victory in last week’s elections have already led to Parliament approving the latest draft of the Brexit agreement, opening the door for the bill to be debated and likely passed into law in early January. If the measure passes, the U.K. will officially exit the EU on January 31. The U.K. will then have a transition period of approximately one year in which it will need to negotiate trade agreements and additional details of its relationships with the EU as well as other nations of the world. The short time span means that the term “No Deal Brexit” will be hanging around for at least another year.

The fact that the U.S. may be considering additional tariffs on more European goods in retaliation for apparent ongoing subsidies paid to aircraft maker Airbus seems to have been swept under the rug by the media in favor of heavy coverage of the impeachment hearings in the U.S. Despite progress in both the China talks and the possible ratification of the USMCA trade agreement between the U.S., Mexico, and Canada, more tariffs on European goods could still derail U.S. trade policy.

As we near the end of the year with equity markets continuing to break records, savvy investors are still taking steps to make sure that their investment portfolios are well diversified. Many of these investors continue to acquire physical precious metals for their portfolios for diversification purposes. Precious metals have historically been viewed as a “safe haven” asset during times of economic turmoil and many analysts continue to view ownership of precious metals as a vital part of a well-balanced, well-diversified investment portfolio.

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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