The Precious Metals Week in Review – October 30th, 2020

1. Volatility remained high this week as the world reached 500,000 coronavirus cases on Wednesday—a new daily-record number since the beginning of the pandemic. On Thursday and Friday, COVID-19 counts reached unprecedented levels in the United States. In Europe, Germany and France enacted new restrictions to curb down the number of new cases and hospitalizations; meanwhile, the British government faces public pressure to impose a new national lockdown. Wednesday was a gloomy day for the stock market; American and European indexes dropped: S&P 500 by 3,53%, Stoxx Europe 600 3%, and the British FTSE 100 by 2%. In the U.S., stocks had the biggest one-day drop since June, erasing all October gains. There was a slight rebound on Thursday: the Dow Jones broke a four-day losing streak and marked the first day of gains for the S&P500, after a three-day slide. The market ended the week with steep losses on Friday, led by declining technology stocks, while European markets got a respite and closed mostly higher.

2. For the week ending on October 24, the seasonally adjusted number of Americans filing for unemployment diminished vis-à-vis the previous week’s revised level. The number of initial claims totaled 751,000, a decrease of 40,000 from 791,000. The revision of the adjusted initial claims for the week ending on October 17 added 4,000 claims, for a total of 791,000. The four-week moving average for the week of October 24 was 787,750, a decrease of 24,500 claims from the preceding week’s revised average. The revision of this average for the week ending on October 17 added 1,000 more jobless claims than estimated for a new total of 812,250.

3. With less than a week until Election Day, state courts and the Supreme Court are dealing with lawsuits seeking to change voting rules. In Minnesota, a federal appeals court eliminated the seven-day grace period for ballots arriving after Election Day; under the new ruling, election officials must dismiss votes arriving after 8 p.m. on November 3. Pennsylvania made the news two weeks ago for a similar lawsuit seeking all ballots come by Election Day. The Supreme Court of Pennsylvania ruled that election officials had to count votes arriving up to three days after the 3rd of November. The case escalated to the Supreme Court, and it upheld Pennsylvania’s highest court ruling. Fortunately, lawsuits have only been a part of the current electoral scenario; early voting has astounded political analysts and has dramatically exceeded expectations. In Hawaii and Texas, early voters have outnumbered their respective state’s 2016 turnout. Similarly, young voters’ participation has been impressive. Compared to young-voter turnout in 2016 for each state, Florida’s is up more than 5-fold; North Carolina’s is up more than 8-fold, and Michigan’s more than 18-fold.

4. In Canada, federal health officials estimate that Canadians will need to cut socializing by 25% in order to avoid a surge in COVID-19 infections. According to projections, Canada could see COVID-19 cases spiking to 8,000 per day in early December if in-person socializing remains at the current level. The model also predicts that the total count could amount to 262,000 sick Canadians and 10,400 deaths by the end of next week. Accordingly, some of the measures that Ontario’s Premier Doug Ford issued earlier this month may have to remain in place. On Thursday, public-health advisers announced that the growth of COVID-19 cases is slowing down in Ontario, they believe, as a result of the preventative measures. Projections suggest that the province could avoid overwhelming intensive care units despite daily increases if the declining trend remains. The 28-day period of restrictions for Ottawa, Toronto, and Peel region is set to expire next weekend; however, health authorities remain cautious and said they need more information before considering easing the measures. In stark contrast, positive cases in the United States are setting new records. On Thursday, 89,000 new cases were reported in the country, which surpasses the records set last Friday and Saturday by about 6,000 cases. The U.S. breached the 9 million tally, and the death toll is close to 235,000.

5. The pandemic has also hampered Canada’s fast-track visa program, seeking to attract professionals, mostly in the tech sector. Before the pandemic, Canadian Prime Minister Justin Trudeau planned to attract 351,000 new permanent residents by 2021. Canada’s welcoming approach to skilled labor intended to compensate for the continuous loss of talent to Silicon Valley. The pandemic badly hit this year’s goals; until August, Canada had only welcomed 38% of this year’s target for permanent residents, and visa processing times have gone from two weeks—for expedited visas—to months. Despite this setback, the Canadian government has decided to revamp the program. Canada will now seek to admit 401,000 new permanent residents by 2021, and between 2021 and 2023, more than 1.2 million new residents. The Canadian government’s plan resonates with Scotiabank’s latest provincial outlook report. Before the pandemic, immigration “was driving healthy market gains and contributing a lot to the economy,” said Marc Desormeaux, senior economist for Scotiabank. In an interview with the Financial Post, Desormeaux concluded that a regain of immigration flows “in conjunction with efforts to keep the virus’ spread under wraps” will be “very important for Canada’s economy […] in the next few years.”

6. European Commission President Ursula von der Leyen recently expressed optimism about Brexit after a meeting with Canadian Prime Minister Justin Trudeau. This week, negotiations moved back to Brussels after seven days of discussions in London, which ended with Downing Street’s remarks about the end of talks. Von der Leyen said negotiations had intensified, and as a result, “We’re making good progress but [there are] two critical issues: level playing field and the fisheries, [where] we would like to see more progress.” In particular, both parties are discussing the level of access for EU fishing companies to British waters. They also need to set rules on domestic subsidies, fair competition rules for businesses, and dispute-solving mechanisms for future disagreements. Charles Michel, European Council President, said that the state of talks needs to be assessed before moving to the ratification phase; however, Brussels expects to move to this stage by mid-November. Justin Trudeau expressed his hope to transfer the terms of the Canada-EU deal to the U.K. so that it continues to benefit after the transition period.

7. Although the Canadian economy continued to grow in August, the economic recovery pace seems to be winding down. On Friday, Statscan released their latest Gross Domestic Product report for August. It estimated September’s GDP growth at 0.7%, compared to 1.2% reported for August and 3.1% for July. If the advanced estimate for September stands, the Canadian economy would have expanded around 10% during the third quarter. Nevertheless, such a growth level means that the Canadian economy remains below its pre-pandemic levels by about 4%. October’s upsurge in coronavirus cases in Canada has led to new restrictive measures, which in turn have strapped economic growth. The growth that sectors like accommodation and food services, real state, and construction experienced in August could be imperiled if cases continue to increase. Sri Thanabalasingam, a senior economist at TD Bank, expressed concern in a research note: “The economy is now moving into the recuperation phase, where additional gains in economic activity are harder to come by. With pandemic-related uncertainty weighing on business and consumer confidence, most industries are struggling to return to pre-pandemic levels of output.”

8. On Friday, oil hit a five-month low and posted its worst week since April. The rise in coronavirus cases in the U.S. and Europe set the alarms on Wednesday as Germany and France enacted new restrictions. Additionally, the increase in oil reserves in the U.S. suggests that demand is waning, which raised questions about the oil market recovery. Brent crude oil started the week above the $40 threshold but fell below it on Wednesday. Despite signs of recovery on Thursday, it continued to fall; on Friday, it bounced back and closed at $37.46. U.S. West Texas Intermediate (WTI) crude oil started the week with slight decreases on Sunday and Monday, but it showed signs of recovery with a price increase on Tuesday. On Wednesday, it began a downward trend that led to a rebound on Friday; it closed the week at $35.79.

9. This was an erratic week for the euro and Japanese yen. The euro spent all week in negative territory against the U.S. dollar. The European currency started a downward trend right after the opening of the trading week. On Tuesday, it tried to reverse course unsuccessfully in the morning and afternoon. On Wednesday, the currency plateaued in the morning and evening; however, the downward trend resumed and took the euro to the week’s low by late Thursday afternoon. On Thursday evening, the currency rebounded and seemed to gain momentum by Friday morning. However, the euro sunk once more before closing and ends the week to the downside against the greenback. The Japanese currency started the trading week with a slight uptick against the U.S. dollar, followed by a small dip and minor attempts to recover. On Monday, right after midnight, the yen fell to negative territory and touched the low for the week by the early afternoon. Right after, the currency started an upward trend that took it to positive territory by Tuesday morning. On Wednesday, the climb was interrupted with a descent close to midday and followed by several recovery attempts that lasted until midnight. In the wee hours of Thursday, the yen fell once again but quickly started an ascent that led to the week’s high by late morning. However, the Japanese currency could not keep the momentum and briefly plunged into negative territory early in the evening. The currency managed to peak again but dived shortly into negative territory before closure. Despite returning to positive territory in early Friday trading, the yen still closed the week to the downside against the greenback.

The Federal Reserve seems to be running out of tools to support the economy. Early in October, the Fed called for fiscal and monetary stimulus and highlighted that delaying it could “lead to a weak recovery, creating unnecessary hardship for households and businesses.” Almost a month later, Congress has not yet passed a stimulus package, and agreement on when it will be enacted remains elusive. Senate majority leader Mitch McConnel said in a radio interview on Friday that he expects more aid will come “right at the beginning of the year” and that the legislation will target “small businesses that are struggling and hospitals that are now dealing with a second wave of the coronavirus.” President Donald Trump has called for faster action and told reporters on Friday that “we will have a tremendous stimulus package immediately after the election.” House Speaker Nancy Pelosi said she does not want to wait until January “because people have needs.” However, she anticipates that Congress “will have something [done] at the start of the new presidency,” that is, after the new president’s inauguration on January 20, 2021.

Sadly, Thursday’s record of new COVID-19 infections became history the next day. On Friday, the U.S. reported close to 100,000 new cases. Thus far, this has been the most aggressive wave: in only fifteen days, the tally went from 8 million to 9 million documented infections. State officials are passing new legislation to fight the virus. On Friday, Illinois enacted new indoor dining restrictions, and Wisconsin ordered new limits for indoor gatherings. European leaders are already alerting their citizens about how December celebrations will look like this year. German Chancellor Angela Merkel and French President Emmanuel Macron announced new restrictions for their respective countries and said they hope these measures will be enough to curb the virus before the festivities. British Prime Minister Boris Johnson is facing pressure for not making a statement on the matter, particularly after the Environment Secretary said on Wednesday that people “may not be able to get together in the larger groups that they normally would.”

Meanwhile, the issue seems taboo in the U.S. as officials and people close to the government have attempted to downplay the matter. On Wednesday, President Trump accused contender Joe Biden of wanting to cancel Christmas on a tweet:

If you vote for Biden, your kids will not be in school, there will be no graduations, no weddings, no Thanksgiving, no Christmas, and no Fourth of July! pic.twitter.com/Pjyd8TGXME

— Donald J. Trump (@realDonaldTrump) October 28, 2020

The following day, Donald Trump Jr. attempted to disregard the gravity of the current wave in an interview by saying that the number of deaths was down “to almost nothing.” Trump Jr. seemed to refer to the fact that daily deaths have decreased compared to the early days of the pandemic. Nevertheless, the day Trump Jr. made the assertion, more than 1,000 people died of COVID-19; this week, the number of deaths from Monday to Thursday surged to 3541, surpassing the September 11 death toll by more than 500 victims.

Investors continue taking steps to ensure that their portfolios remain diversified against the current uncertainties, and many continue to use physical precious metals for that very purpose. 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.

Trading Department
Precious Metals International, Ltd.

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