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1. Geopolitical tensions have returned with a vengeance to overtake COVID-19 as the primary source of concern for markets. COVID-19 continues to generate uncertainty however as more countries begin easing their lockdowns and undertake monitoring for a potential wave of secondary outbreaks.

The Precious Metals Week in Review - May 29th, 2020.
The Precious Metals Week in Review – May 29th, 2020.

2. The seasonally adjusted number of Americans filing initial claims for state unemployment was lower again for the week ending May 23, falling by 323,000 claims from the previous week’s revised level to reach 2,123,000 claims. The previous week’s claims level was revised higher by 8,000 claims. The four-week moving average of claims also fell again this week, dropping by 436,000 from the previous week’s revised average to reach a new level of 2,608,000. The previous week’s moving average was revised higher by 2,000 claims. Uncertainty within the unemployment data can be expected to remain as many businesses begin attempting to recall their employees as state-mandated shutdowns and restrictions are eased.

3. As the current round of relief funding that was passed by the U.S. Congress at the height of the economic crisis nears its end, Congressional leaders are already pondering the next potential round of spending. The House of Representatives passed a $3 trillion rescue package last week that would extend the $600 per week emergency federal supplement to state unemployment benefits through January 2021, but Senate Majority Leader Mitch McConnell said that the next bill aimed at offering relief from the economic devastation brought on by the pandemic would not extend the temporary benefit boost past its original end date in July. McConnell has also questioned the need for rapidly drafting another spending bill, saying that he would prefer to wait until data regarding the $2.5 trillion in relief funding that has already been spent can be analyzed to see if the funds are being used for the purposes that they were intended.

4. On Friday, President Donald Trump announced that his administration would begin taking steps to eliminate the special treatment that Hong Kong currently receives in its trading relationship with the U.S. in response to China’s decision to pass a controversial national security law that tightens its grip on the former British colony. At a news conference late Friday afternoon Trump said “I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment. My announcement today will affect the full range of agreements that we have with Hong Kong, from our extradition treaty, to our export controls and technologies.”

Trump continued, saying “We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.” The announcement came after Secretary of State Mike Pompeo submitted a report to Congress on Wednesday, and also said in an accompanying statement, that “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground.” The new security law was formally approved by China’s People’s Congress on Thursday and is expected to make most forms of political protest in Hong Kong criminal acts under widespread bans on “sedition” and “subversion.” Hong Kong residents have taken to the streets in recent years to demonstrate against what they perceive to be Beijing’s intrusion into the freedoms that they have enjoyed for decades.

5. In the same press conference in which he announced that the U.S. would be taking steps to change Hong Kong’s special trading status, President Trump also announced that the US would be terminating its relationship with the World Health Organization (WHO). Trump has repeatedly leveled criticism at the WHO’s response to the pandemic and said “China has total control over the World Health Organization despite only paying $40 million per year compared to what the United States has been paying, which is approximately $450 million a year. The world needs answers from China on the virus. We must have transparency. Why is it that China shut off infected people from Wuhan to all other parts of China?” he added “It [the virus] didn’t go to Beijing, it went nowhere else, but they allowed them to freely travel throughout the world, including Europe and the United States.”

6. Crude oil surged this month, climbing close to 90% in May in spite of the continued spread of the coronavirus around the world. Despite what is being described as its “best month on record”, oil is far away from its most recent highs seen in January, just before COVID-19 escaped from China and entered the rest of the world. The slow reopening of economies around the globe has increased demand for crude, but the excess supply that continued to make its way into storage facilities while the world’s major economies were shut down will likely take months to drain out of the system, if not years.

7. The euro began the shortened trading week fairly flat against the U.S. dollar but had begun a fairly steady move to the upside by late Tuesday night. The euro moved higher for most of the week, pausing only briefly to dip lower on Wednesday after a sudden spike to the upside. The euro soon resumed its climb, however, bouncing briefly lower again on Thursday. The euro will close out the week to the upside against the U.S. dollar despite a dip lower just prior to the close. The Japanese yen traded in a relatively narrow range again this week, shifting between moving lower and higher against the U.S. dollar all the way through Thursday. The yen climbed near vertically into positive territory late on Thursday night but by mid-morning Friday had sunk back into negative territory. The yen will close out the week slightly to the downside against the U.S. dollar.

Geopolitical tensions will likely take over the news cycle for the near term, eclipsing the ongoing COVID-19 pandemic as the U.S. and China face off over Hong Kong. U.S. Secretary of State Mike Pompeo’s report to Congress on Wednesday which noted that Hong Kong can no longer be considered to be operating with any degree of autonomy from Beijing set the stage for President Trump’s announcement on Friday that the U.S. was going to begin taking steps to remove the special designation from Hong Kong that allows it to trade with the U.S. under minimal tariffs.

Trump used the same news conference to announce that the U.S. would also be terminating its relationship with the World Health Organization and would direct the roughly $450 million a year that it currently sends to the WHO “to other worldwide and deserving urgent global public health needs.” The Trump administration has been accusing the WHO of favoring China since the earliest days of the virus outbreak and had previously “temporarily” suspended payments to the organization with a call for it to make reforms.

The reopening of the world’s economies has boosted the demand for crude oil, lifting it off its dramatic and historic lows as factories restart and begin manufacturing their goods once more. In the U.S., reports continue to surface that some larger factories such as auto manufacturers and meat processing plants continue to see an increase in cases of COVID-19, causing delays and/or complete shutdowns in their operations. Small businesses such as restaurants and local retail stores are struggling to deal with new health and social distancing mandates which are impacting their ability to service their customers and continue to siphon off their profits.

Many analysts feel that small businesses in the U.S. will be irrevocably changed by the spread of COVID-19 and many of these same analysts expect a rash of bankruptcies and business closures to occur later in the year. Larger businesses that depend on the willingness of their customers to travel in groups, such as airlines and cruise ships, also continue to watch their profits disappear. Follow-on effects from the decrease in air travel are also beginning to make their way into the rental car industry which, in turn, will likely trickle down into the auto manufacturers.

Hertz Global Holdings Inc., one of the U.S.’s largest rental car companies, has already filed for bankruptcy protection and more such filings could follow. Rental car companies are one of the largest consumers of automobiles and their business failures could send U.S. auto manufacturers scrambling to find outlets for excess inventory.

Next week’s U.S. Non-Farm Payrolls Report is expected to be devastating, with unemployment likely shooting as high as 20%. The Federal Reserve continues to state that it will “use all of its tools” to combat the economic effects of the outbreak and the sheer amount of money that is being injected into the global financial system by the Fed and its counterparts around the world is simply unfathomable. Economists are in uncharted waters and most freely admit that they have no idea how the steps being taken by the world’s central banks will turn out in the end.

As geopolitical tensions flare once more, savvy investors are committed to ensuring that their portfolios remain diversified against another economic downturn. Many investors have continued acquiring physical precious metals for the purpose of this portfolio diversification, viewing physical precious metals’ historical roles as hedges against times of extreme uncertainty as still valid, even in the digital world.

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)

  May 22nd2020 May 29th2020 Net Change
Gold $1736.75 $1736.20 (0.55) – 0.03%
Silver $17.21 $17.88 0.67 + 3.89%
Platinum $837.30 $838.60 1.30 + 0.16%
Palladium $1957.60 $1965.40 7.80 + 0.40%
Dow Jones 24465.16 25383.11 917.95 + 3.75%

Month End to Month End Close

  Apr. 30th2020 May 29th2020 Net Change
Gold $1685.20 $1736.20 51.00 + 3.03%
Silver $14.87 $17.88 3.01 + 20.24%
Platinum $785.50 $838.60 53.10 + 6.76%
Palladium $1986.00 $1965.40 (20.60) – 1.04%
Dow Jones 24345.72 25383.11 1037.39 + 4.26%

Previous year Comparisons

  May 31st2019 May 29th2020 Net Change
Gold $1306.35 $1736.20 429.85 + 32.90%
Silver $14.59 $17.88 3.29 + 22.55%
Platinum $795.35 $838.60  43.25 + 5.44%
Palladium $1334.00 $1965.40 631.40 + 47.33%
Dow Jones 24815.04 25383.11 568.07 + 2.29%

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

  Gold Silver
Support 1725/1700/1680 17.60/17.00/16.00
Resistance 1750/1780/1800 18.00/18.40/19.00
  Platinum Palladium
Support 800/770/750 1880/1760/1700
Resistance 840/880/900 2000/2100/2200
This is not a solicitation to purchase or sell.
© 2020, Precious Metals International, Ltd.

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