The Precious Metals Week in Review – October 2nd, 2020

1. This week, the surge in COVID-19 cases, along with concerns about the elections and transfer of power, fed the already high volatility levels. The U.S. dollar took a critical hit early this week and got investors wondering whether this was the end of the currency’s supremacy in the monetary system. The week closes with President Trump and the First Lady’s announcement that they had contracted COVID-19; markets all across the board reacted to the news and prompted a sell-off in stocks both in Europe and the U.S.

2. For the week ending on September 26, the seasonally adjusted number of Americans filing for unemployment decreased vis-à-vis the previous week’s revised level. The number of initial claims totaled 837,000, a decrease of 36,000 from 873,000. The revision of the adjusted initial claims for the week ending on September 19 added 3,000 claims more than estimated, for a total of 873,000. The four-week moving average for the week of September 26 was 867,250, a decrease of 11,750 claims from the preceding week’s revised average. The revision of this average for the week ending September 19 added 750 more jobless claims than estimated for a new total of 879,000 initial claims. A backlog in processing and the need to implement fraud-prevention technology led California to announce a two-week pause in processing initial unemployment insurance claims. In the meantime, the Department of Labor’s weekly reports will use the last report’s data corresponding to this state. Once the changes are complete, California will release pieces to inform of the unemployment claims that took place during the unreported weeks.

3. The Nonfarm Payroll Report for September was issued this Friday and noted an increase of 661,000 new jobs in areas unrelated to agriculture and a decline in the unemployment rate of 0.5 percentage points. The total number of jobless people in the United States fell by 1 million to 12.6 million, which set the unemployment rate at 7.9 percent. September is the fifth consecutive month of declines for these two measurements; however, they remain above February levels. The report attributes the improvements in payroll to the resumption of economic activity and details the sectors with the most significant increases in hires: leisure and hospitality brought back 318,000 jobs; retail trade, 142,000; health care and social assistance added 108,000; and professional and business services 89,000 more. Government employment moved inversely to these areas and reported 231,000 and 49,000 jobs lost in local government education and state government education, respectively. Despite the declines in the unemployment rate and the positive addition to payrolls, the report widely missed economists’ expectations an addition of 800,000 to nonfarm payrolls.

4. President Trump bookended the week with news. On Sunday, The New York Times released the first conclusions of President Trump’s tax records that span over two decades. Among the findings, The New York Times reported that President Trump did not pay federal taxes in 11 of 18 years, and he only paid $750 in 2017, after he became president. Additionally, while many of his emblematic businesses are reporting losses, President Trump still finds a way to lead an opulent life and uses personal expenses, such as $70,000 in hairstyling for television, to take tax deductions. The week closed with an early Friday tweet by the president, where he admitted he and his wife had tested positive for COVID-19. The White House’s physician wrote in a memo that both of them are well and plan to remain in the White House while they heal. The note also said the president expects to “continue carrying out his duties without disruption while recovering.” Mark Meadows, the White House chief of staff, relayed that the president was experiencing “mild symptoms” and that he and the First Lady remained in “good spirits.” The news stoked concerns about a second wave and its consequences for the economy and negatively affected the stock market.

5. Today, Ontario reported 732 new cases of COVID-19 and a growing backlog in testing. This week, the said province surpassed twice the 700-cases threshold and declared a delay with the results of more than 90,000 tests. Most of the cases have been reported in the Greater Toronto Region and Ottowa, and so far, the transmission is highest among people under 40 years of age. Unfortunately, 37 new cases have been linked to schools, of which 30 are students. As a result, the province has adopted new restrictions that comprise a new masking policy in workplaces and caps at 100 the number of clients that can simultaneously gather in restaurants, bars, banquet halls, and gyms. In Quebec, the number of cases peaked at 1,052, the highest since May. This week, François Legault, the Premier of Quebec, announced a 28-day lockdown that bans large gatherings and contemplates the use of fines to punish those who disobey. In total, Canada counts 162,326 confirmed cases.

6. The United States had the first of a series of presidential debates on Tuesday. Newspapers worldwide reported the event as a contemptible spectacle where the sitting president’s behavior left too much to be desired. During the debate, President Trump continually interrupted the moderator and the Democratic candidate, former vice-president Joe Biden. Newspapers in the United States also highlighted President Trump’s threats not to leave the presidency, his resistance to condemn white supremacy, his endorsement of the far-right group Proud Boys, and his call to this group to “stand back” and “stand by.” Although Joe Biden did better than Trump, the media did not declare him the winner. Although he addressed the American people several times and broke the debate rules a couple of times, he fell in President Trump’s game and sparred with him over issues unrelated to the country’s needs.

7. The Canadian federal government issued new exemptions to border restrictions related to COVID-19. The good news means that more relatives of Canadian citizens and permanent residents can enter the country. Marco Mendicino, the Immigration Minister, acknowledged that in spite of the critical role COVID-19 measures have played, “restrictions should not keep loved ones apart.” The list now includes adult children, siblings, grandparents, and men and women that have been in a serious relationship for not less than a year. The Immigration Ministry will soon publish the requirements to enter and warned that people should not make plans until they have received authorization under the new scheme. For now, the only known requisites are that couples will need to prove their relationship with a notarized declaration, and people can start arriving as early as October 8, right before Canadian Thanksgiving.

8. Angela Merkel, the German Chancellor, announced that although no significant progress had been made with the Brexit negotiations, she reckoned it was still possible to secure a trade agreement before December 31. The chief British negotiator, David Frost, resonated with Merkel’s declaration but added that the disagreement on fisheries is “unfortunately very large, and without further realism and flexibility from the E.U.” the divergence could be “impossible to bridge.” Boris Johnson, the British Prime Minister, went even further and said the European Union had to show common sense, adding that all he wanted was a commercial treaty similar to the one struck with Canada. While Johnson and the European Union think such an agreement can be reached by mid-October, the European Union’s chief negotiator, Michel Barnier, expressed disagreement and said the talks would go until the end of the month. He added that beside fisheries, serious divergences remained, mainly in the areas of fair competition, state aid, and dispute-solving mechanisms; he also highlighted the progress made in aviation safety and fundamental rights—except for personal data protection. Failure to come to an agreement would endanger around one trillion euros in annual trade.

9. Markets across the board took a hit on Friday after President Trump declared he and Melania had contracted COVID-19. However, oil took the worst of it and completed the second week of losses. After spending most of the week above the $40 threshold, on Friday, Brent crude oil went down to $38.79, the week’s lows. West Texas Intermediate crude oil did not fare any better; the U.S. benchmark crude oil started the week above $40 and also touched its lows on Friday, $36.63. Brent crude oil closed the week at $38.90 and WTI at $37.01. Despite the time coincidence, analysts argue that Trump’s test results had no direct relation to the drop in oil prices. Analyses point to the increase in supply—mainly from Libya and Iran, both OPEC+ countries not bound by OPEC production quotas—and a low demand expected to contract even further with the second wave.

10. The euro had mostly an upwardly moving week against the U.S. dollar. On Sunday, the euro touched the week’s lows right after opening the trading week and feel into negative territory. The currency successfully moved onto positive territory by Monday, at the third attempt, thus initiating an upward trend that lasted until the early afternoon of Wednesday. From there on, the euro experienced some ups and downs without ever leaving positive territory. On Thursday, right before midnight, the euro reached the highs of the week; however, it experienced a considerable drop early in the morning and is readying to close the week to the downside against the U.S. dollar. In contrast, the Japanese yen had an erratic week against the U.S. dollar. The Japanese currency went through some peaks and valleys right at the beginning of the week, but soon recovered and started an ascent that lasted until the early morning of Monday. A roller coaster that extended until the wee hours of Friday took the yen to the week’s lows in the first hours of Thursday. In the early morning of Friday, the currency touched the week’s highs, and it is preparing to close the week to the downside against the U.S. dollar.

The presidential debate in the United States was discussed around the world for all the wrong reasons. In Japan, interpreters complained about not being able to relay the discussions to their non-English speaking audiences because of President Trump’s constant interruptions. Newspapers in the United States also highlighted President Trump’s resistance to condemn white supremacy and his call to the far-right group Proud Boys to “stand back” and “stand by.” Despite Joe Biden’s good behavior, the former vice-president let Trump take the discussion to entirely unrelated topics—Trump’s “superior” college diploma from an Ivy League university and the drug abuse problems of Biden’s son, Hunter.

In stark contrast and total incongruity with stereotypes, New Zealand’s Prime Minister Jacinda Arden also debated with Opposition Leader Judith Collins this week. The two leaders met for a debate where they argued and recognized each other’s trajectories, agreed on specific topics, and even laughed. Ardern and Collins clashed over the timing of the coronavirus lockdowns and interrupted each other over the most heated issues. However, they agreed on the need to keep strict measures to maintain New Zealand free of the disease and did not resort to insults nor attacks to family members.

Still, in the political realm, the United States’ House of Representatives passed a new version of the Heroes Act last night. The price tag of this new COVID-19 relief package was set at $2.2 trillion. It brings back old measures from the first round of aid: the second cycle of stimulus checks, unemployment-federal benefits of $600 per week, along with dependant care assistance to help families pay for child care, and with child tax credit among others. Homeowners and tenants would also receive assistance to pay for rent, utility bills, and mortgages; student loan relief would be expanded in this new package, and state and local governments would also receive support funding. It is unknown which parts of the act will be sanctioned into law; for now, the Speaker of the House, Nancy Pelosi, and the Secretary of Treasury Steven Mnuchin continue their negotiations.

California’s ongoing fires have added one more source of concern to an already upsetting week. The cluster of fires that began in mid-August with a lightning strike was contained on Thursday; however, a new major blaze, called Glass Fire, is now threatening 28,000 homes. Since it started last Sunday, it has destroyed almost 600 buildings between homes and commercial structures. At this pace, California could soon reach a new record of 4 million acres burned by wildfires. California’s Fire Chief, Thom Porter, said that the total area burned in wildfires this year is more than twice the previous high of 1.54 million acres. The flames have charred an area close to the size of New Jersey; they have killed 31 people and burned hundreds of homes. Close to 80,000 people are under evacuation orders, and more could be possible, depending on the speeds of winds. Forecasters hope that the tropical moisture left by Hurricane Marie will be pulled north and bring considerable rain to Northern California. A total of 17,000 firefighters have been fighting close to two dozen blazes since the fires started in mid-August.

In the old continent, the European Union filed a legal case against Britain in response to the Internal Market Bill—Boris Johnson’s attempt to fix the Brexit deal’s terms. The said bill sought to give U.K. Ministers the required powers to modify the terms regarding the movement of goods between Britain and Northern Ireland if the E.U. and the United Kingdom fail to finalize an agreement. On Saturday, Johnson will meet with the head of the E.U.’s executive, Ursula von der Leyen, to agree on the next phases of negotiation since the undertaking of legal measures by the European Union. Von der Leyen spoke after the E.U. Summit and said that time has come to intensify the discussions between the bloc and the U.K., to which she added: “Where there’s a will, there’s a way.” Angela Merkel echoed Von der Leyen when she spoke about the stickiest negotiation issue, fisheries.  Alluding to the recent deal between the U.K. and Norway, the German Chancellor is hopeful for a future pact between the U.K. and the E.U.

As ongoing worldwide health crises and politics continue to stoke uncertainty, investors continue to regard precious metals, particularly gold and silver, as a hedge for their capital and a means to diversify their portfolios. Savvy investors continue to watch the precious metals markets for opportunities to buy at a discount. Nevertheless, precious metals should always be viewed as a long-term investment; the key to profitability through the ownership of physical precious metals is to acquire the physical product and hold on to it for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long run.

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Precious Metals International, Ltd.

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