The Precious Metals Week in Review – January 24th, 2020

1. It was another shortened trading week as the U.S. celebrated the life of Dr. Martin Luther King on Monday. The impeachment trial of Donald J. Trump got underway in full this week and the expected political wrangling and mud-slinging did not disappoint.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment jumped by 6,000 claims from the previous week’s revised level to hit 211,000 for the week ending January 18. The previous week’s number was revised higher by 1,000 claims. The four-week moving average decreased by 3,250 claims from the previous week’s revised average and stood at 213,250 claims. The previous week’s moving average was revised higher by 250 claims. Unemployment data can be expected to remain volatile for several more weeks.

3. The impeachment trial of President Donald J. Trump began this week with the Impeachment Managers from the House of Representatives making their arguments before the Senate with Chief Justice John Roberts presiding over the proceedings. Justice Roberts has already been forced to admonish both the Managers and the President’s legal team to watch the way they act. Representatives Jerry Nadler and Adam Schiff leveled heavy criticism at the Senate itself for what they perceive to be a lack of interest in a fair trial.

4. Now that the ink is dry on the “Phase One” trade deal between the U.S. and China, the two will now begin negotiations on the secondary phase which should be much more complex and cover many more technical details of the trade relationship between the two. The Phase One agreement is largely viewed as a stopgap measure to alleviate tensions while the negotiations over the real problems between the two nations get underway. Negotiations will likely be hampered by the recent spread of a dangerous strain of coronavirus that originated in China and now appears to be spreading throughout the globe. China has quarantined three cities, covering roughly 35 million people, in an effort to prevent further spread of the disease.

5. On Saturday Hong Kong’s embattled leader, Carrie Lam, declared a state of emergency over the spreading coronavirus. Lam canceled all official visits to mainland China and extended school cancellations through February 14. Lam also took further steps to limit overall travel by citizens of Hong Kong to and from the mainland and was forced to cancel the annual Lunar New Year celebrations city-wide. Australia joined the growing ranks of countries that are now seeing the spread of the virus, finding its first four cases this past week as well.

6. U.S. Bonds appear to be signaling uncertainty over the global economy, with yields on the 10-year seeing their largest one week decline since last fall when the spiraling U.S.-China trade dispute looked set to escalate. The growing spread of the coronavirus outside of China could lead to severe impacts to the global economy, triggering an economic slowdown, particularly if movements of goods are curtailed between affected countries.

7. Crude oil dipped again this week, suffering its worst weekly decline since last July as fears of the growing spread of the coronavirus triggered uncertainty over its impact on global demand. Brent crude settled at $60.69 while West Texas Intermediate settled at $54.19.

8. The euro bounced along between positive and negative against the U.S. dollar in a shallow channel for most of the week. On Thursday, the euro took a near vertical dip to the downside, staged a brief recovery and then resumed its downward trend through the rest of the week. The euro touched its lows for the week on Friday before turning slightly higher just before the close. The euro will finish the week out to the downside against the U.S. dollar. The Japanese yen trended higher against the U.S. dollar for the entire week and will close out the week to the upside against the U.S. dollar.

As the recently discovered coronavirus makes its way around the world, it will likely be the sole factor to have the most immediate impact on market volatility. China and Hong Kong have both taken steps to curtail travel into and out of affected regions but such steps appear to have come too late. The virus has already made appearances in the U.S., Australia, France, Nepal and several other countries in Asia. It is possible that the flow of global goods could be curtailed as affected countries take containment steps which may delay shipping, leading to unexpected delays in manufacturing across the globe. Such an interruption to the flow of global trade could be the trigger that finally brings the long-awaited recession that analysts have been saying is years overdue at this point.

In the U.S., the impeachment trial of President Donald J. Trump is entering the next phase as the President’s legal team begins countering the charges that the Impeachment Managers from the House of Representatives spent the week detailing against him. It is still widely expected that the Senate will acquit Trump of all charges, given the purely partisan nature in which they were drawn up, but the partisan bickering and legal wrangling could impact the U.S. government for years. The entire case against Trump is based upon mostly second and third-hand accounts of his phone call with the President of Ukraine and not eyewitness testimony.

In Europe, the United Kingdom is preparing to undergo its final week as a member of the European Union. The U.K. exits the bloc on January 31 and will have just 11 months remaining to negotiate new trade agreements between itself and the other nations of the world, including the EU itself. Prime Minister Boris Johnson has already said that he will not request an extension to the transition period that ends December 31, 2020.

As uncertainty grows over the economic impact of the coronavirus outbreak, savvy investors continue to take steps to diversify their portfolios against a downward turn in equities. Many investors continue to acquire physical precious metals as part of their diversification plans, recalling their long and historic role as a safe haven and store of value 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.

Trading Department
Precious Metals International, Ltd.

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