The Precious Metals Week in Review – October 16th, 2020

1. This week, volatility continued to roam high. The rise in COVID-19 cases in North America and Europe and the deadlock in negotiations over a stimulus package in the U.S. are the reasons behind the stock market slide. This week, the S&P 500 and Dow Jones Industrial Average fell for three consecutive days; this is the longest losing stretch since September. The current situation prompted IMF directors to comment on the matter.

2. For the week ending on October 10, the seasonally adjusted number of Americans filing for unemployment elevated vis-à-vis the previous week’s revised level. The number of initial claims totaled 898,000, an increase of 53,000 from 845,000. The revision of the adjusted initial claims for the week ending on October 3 added 5,000 claims more than estimated, for a total of 845,000. The four-week moving average for the week of October 10 was 866,250, an increase of 8,000 claims from the preceding week’s revised average. The revision of this average for the week ending October 3 added 1,250 more jobless claims than estimated for a new total of 858,250 claims. This week should be the last of California’s two-week pause to implement fraud-prevention technology. Since the announcement, the Department of Labor’s weekly reports has used the latest data California produced before the halt. Once the changes are complete, California will release individual reports to inform of the unemployment claims that happened during the unreported weeks.

3. In a visit to Guangdong’s province on Tuesday, Chinese President Xi Jinping told military troops to prepare for war. The main goal of Xi’s visit to the province was to deliver a speech on Wednesday to commemorate the 40th anniversary of the Shenzhen Special Economic Zone, critical in the growth of the Chinese economy and in attracting foreign investment. According to the state news agency Xinhua, Xi urged soldiers to “maintain a high state of alert” and to “put all (their) minds and energy on preparing for war.” Xi’s words come after the White House’s announcement to proceed with the sale of three advanced weapon systems to Taiwan. The move clearly angered China, which has long thought of Taiwan as a wayward province of mainland China and has vowed to use force, if necessary, to reintegrate it. Additionally, the Chinese Foreign Ministry spokesman, Zhao Lijian, pressed Washington to “immediately cancel any arms sales plans to Taiwan” and cut all “US-Taiwan military ties.”

4. Canadian relationships with China are also under strain. With the occasion of the 50th anniversary of Canadian Chinese diplomatic relations, both countries used the event to express their stances on key topics. During the Canadian celebrations on Tuesday, Canadian Prime Minister Justin Trudeau accused China of employing “coercive diplomacy.” On Thursday, Chinese ambassador to Canada Cong Peiwu used the commemorative news conference to warn Canada. Cong said that accepting Hong-Kong refugees could endanger the “health and safety of […] 300,000 Canadian passport holders” who live in Hong Kong and the Canadian companies operating in the region. As reported by the Globe and Mail, Canada has accepted two Hong Kong activists as refugees. Cong called the asylum seekers “violent criminals” and added that Canada’s consent not only intervened in Chinese internal affairs but that it also “embolden[ed] these criminals.” The ambassador also warned the Canadian government not to declare China’s treatment of the Muslim Uyghur minority as “genocide.”

5. On Tuesday, the IMF warned of a possible “sharp readjustment in asset prices or periodic bouts of volatility.” The IMF’s director of the monetary and capital markets department, Tobias Adrian, wrote in a blog post that equity markets could plummet in the following months unless the coronavirus crisis is controlled, and the economic recovery materializes sooner rather than later. Despite the upward momentum in the stock market, the disconnect between this market and “the weak economic activity and uncertain outlook” is undeniable. He highlighted the importance of policy to support the markets and thus keep the investor’s optimism going. However, economic recovery must not take long so as to avoid a readjustment. On Thursday, the managing director of the IMF, Kristalina Georgieva, echoed Adrian’s on an interview with CNBC. Georgieva underscored the positive impact of a stimulus package for the U.S. economy and added that an earlier implementation would “provide a boost to certainty and certainty is something we do need in this crisis.” The director also opined on the role of the monetary policy and argued that it was “best if [the levers of fiscal policy and monetary policy] are used together in combination.” The words of both IMF economists come after the negotiations between Democrats and Republicans stalled over the size of the stimulus package.

6. Ebola-drug Remdesivir, recently administered to President Trump to treat him for COVID-19, was recently part of a World Health Organization trial along with three other medications. The study sought to evaluate these four drugs’ potential to cure COVID-19: Remdesivir, malaria-medication Hydroxychloroquine, auto-immune drug Interferon, and a combination of lopinavir and ritonavir, used on patients with HIV. On Friday, the WHO made the results public and concluded that Remdesivir has “little to no effect,” contradicting recent studies. The four medications were tested on 11,266 adult patients in 30 countries, across 500 hospitals. Although the results are yet to be peer-reviewed, they suggest that none of these medications substantially impact mortality nor the length of hospitalization. The findings were received with mixed feelings. Gilead Sciences Inc., who recently concluded that Remdesivir shortened recovery time by five days, said the study was inconsistent with the results of more robust and better-controlled evaluations. The head of RECOVERY trial in the U.K., Profesor Martin Landray, welcomed the results had said that the “WHO Solidarity trial has done the world a huge favor by producing clear, independent and robust results.” On a different note, Pfizer—who is at the vanguard of the COVID-19 vaccine race in the United States—declared its results will be ready close to two weeks after Election Day, making it harder for Trump to use the vaccine as a campaign booster.

7. In Canada, a spin class in Hamilton, west of Toronto, turned into a super-spreader event with 69 cases. Consequently, the province of Ontario decided to review its guidelines for gyms and fitness centers and are considering if new rules are needed. This is one of the worst breakouts of COVID-19 in the country. Earlier this month, a recreational hockey match in Toronto was linked to 21 COVID-19 cases, and in late September, a fitness center was related to 18 positive tests. In Toronto, Ottawa, and Peel region, gyms and fitness centers have been closed since last Saturday. On Friday, Ontario Premier Doug Ford announced stricter rules for the York region after an “alarming” rise in COVID-19 cases.

8. Brexit discussions are again on the brink of failure. The British Prime Minister spokesman said on Thursday there was “no point” in continuing the conversations next week unless the European Union got ready to discuss in detail a new legal partnership. He added that “Trade talks are over. The E.U. has effectively ended them by saying they do not want to change their negotiating position.” With less than 100 days to reach a new agreement, U.K.’s Prime Minister Boris Johnson has decided not to budge his stance and say that the deal is “all there” and that it is up to the European Union to take the next step. Although both parties have settled on areas like aviation safety, others—notably fisheries and medicine safety—are still on the fence. The British declarations were not a cause of concern among the E.U. leaders. Commission President Ursula von der Leyen responded on Friday morning with a tweet saying that the “The E.U. continues to work for a deal, but not at any price. As planned, our negotiation team will go to London next week to intensify these negotiations.” As reported by the BBC, senior diplomats were “deeply unimpressed” and said they are “getting used to being part of Johnson’s pantomime.” Some think that all this is part of Boris Johnson’s strategy to buy some time to deal with the COVID-19 crisis.

9. This week marked the second straight week of gains for oil. Signs of OPEC+’s adherence to production-cut commitments and a fall in U.S. crude supplies supported the rise in prices. Both Brent Crude  and West Texas Intermediate oils finished the week above the $40 threshold. Brent crude oil had an easier week on that front with a low of $41.36 on Monday and a high of $43.48 on Thursday. On Friday, Brent crude had a small dip and closed the week at $42.85. WTI crude oil went below the $40-dollar threshold four days but managed to close over $40 each day since Tuesday. The low of the week for WTI crude oil was $39.04 on Monday, and the high was $41.29 on Thursday. WTI experienced a similar dip to that of Brent oil on Friday and closed the week at $40.78.

10. The euro had a downwardly moving week in negative territory against the U.S. dollar. Right after the trading week’s opening, the European currency dipped and fell to negative territory. On Monday, it tried to stage two recoveries, but each was followed by drops. On Tuesday afternoon, the euro had the week’s steepest decline, followed by a small ascent late that evening. On Wednesday, an afternoon ascent succeeded a morning drop, but by the early morning of Thursday, the euro resumed the downward trend and touched the week’s low early in the afternoon. On Friday, the currency peaked again right after midday to no avail and closed the week slightly to the upside against the U.S. dollar. The Japanese yen spent most of the week in positive territory against the U.S. dollar; however, it was not without some lows. On Sunday evening, it opened the trading week with a small ascent followed by an abrupt fall that took it to the low of the week and negative territory. The Japanese currency quickly staged a successful recovery that took it to positive territory on Monday’s early morning. A few hours later, the currency shortly dipped and bounced out of negative territory in the afternoon. The yen stayed above the opening level until the early afternoon of Tuesday, fell below it until the early afternoon, and definitely left it by the early evening. The Japanese currency touched the high of the week on Thursday afternoon and experienced some ups and downs through Friday morning. The yen dropped again on Friday morning and closed the week slightly to the downside against the U.S. dollar.

Trading Department
Precious Metals International, Ltd.

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