The Precious Metals Week in Review – November 6th, 2020

1. For the first week since the early days of the pandemic, the coronavirus took the back burner, as the United States’ elections took center stage. In spite of the unending tallying, stocks rallied this week until Thursday. Despite Friday’s dips, the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average posted their largest weekly gains since April: 9%, 7.3%, and 6.9%, respectively. Investors betted on tech stocks—the most resilient winners of this year—and tech shares bolstered this week’s gains for the three major indexes. These gains came as a surprise as the previous week posted the biggest weekly declines for all three indexes since March.

2. For the week ending on October 31, 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 751,000, a drop of 7,000 from 758,000. The revision of adjusted initial claims for the week ending on October 24 also dropped by 7,000 claims, for a total of 758,000. The four-week moving average for the week of October 31 was 787,000, a drop of 4,000 claims from the preceding week’s revised average. The revision of this average for the week ending October 24 added 3,250 more jobless claims than estimated for a new total of 791,000.

3. The presidential race overshadowed October’s Nonfarm payroll report. Nonfarm sectors of the economy created new 638,000 jobs, and the unemployment rate decreased to 6.9%—well below the 7.7% economists expected. The number of unemployed Americans fell by 1.5 million to 11.1. The report attributed these new jobs to the resumption of economic activities that the coronavirus’s spread had forced to a halt. Leisure and hospitality, professional and business services, retail trade, and construction were the sectors with the biggest gains, whereas employment in the government sector declined. Leisure and hospitality hiring increased by 271,000, with 192,000 of those jobs at bars and restaurants; in the meantime, the public sector lost 268,000 jobs, of which 147,000 were Census-related and educational jobs. Experts are concerned with the quality of these jobs; Grant Thornton Chief Economist Diane Swonk noted that many people were taking part-time jobs to survive. “Much of the recall for workers was hospitality and leisure. Many had to accept jobs even if they were part-time.” Swonk estimated at 376,000 the number of new part-time workers, which takes the total to 5.3 million.

4. Election Day turned into Election Week in the United States. As of Friday morning, Americans did not know the name of their new President nor the partisan composition of the U.S. Senate. The presidential race was still too close to call in Alaska, North Carolina, Arizona, Pennsylvania, Nevada, and Georgia, and final results will be released during the weekend. Pennsylvania’s 20 electoral votes would be enough to call Joe Biden elect President. In comparison, President Trump would require at least four additional states to reach the 270 electoral votes to be ratified as Head of State. Georgia holds 16 electoral votes; North Carolina, 15; Arizona, 11; Nevada, 6; and Alaska, 3. The change of rules before Election Day, added to the unprecedented turnout and the record use of absentee and mail-in ballots motivated by the pandemic have significantly delayed tallying.

5. Election Week has been hectic, to say the least. After the closure of voting polls, President Trump took the podium to declare an early victory. Since then, Trump’s Twitter calls to “STOP THE VOTE” became “STOP THE FRAUD,” and finally morphed into lawsuits against the different states where counting continues. The Trump campaign issued a recount request for Wisconsin and Georgia decided to tally votes again because of the slim margin. Jenna Ellis, the senior legal advisor to the Trump campaign, tried to dissipate the confusion that President Trump’s tweets sowed. In an interview with “Good Morning Britain,” she explained that they wanted the counting to stop in states like Michigan until they provided “meaningful access to be able to watch the process to make sure that no illegal activity is occurring.” When asked about evidence of illegal activity, Ellis mentioned “a lot of videos” showing vote suppression and voter intimidation and stressed that President Trump was on the side of law and that the United States is a country of rules. One of the pieces of evidence that circulated claimed that ballots had been slipped on a wagon into the TCF counting center in Detroit, Michigan. The video was actually of a photographer loading camera gear for work, explained ABC’s WXYZ Detroit, the news station for which the photographer works. A Court of Claims judge denied the campaign’s request to halt the tallying of votes as counting had already ended, and the claims lacked evidence. Michigan Attorney General Dana Nessel’s office spoke of the request as an “attempt to unring a bell.”

6. The Federal Open Market Committee convened on Thursday and announced in a post-meeting statement that it would maintain the short-term borrowing rates near zero. The rates have ranged between 0%-0.25% since the Federal Reserve cut the rates as an emergency measure seven months ago to counter the economic crisis triggered by the coronavirus pandemic. Contrary to what some economic analysts have said about the Fed’s lack of tools to support the economy, Jerome Powell, Chair of this institution, stated in a press conference that monetary policy still has ammunition to counter the economic crisis. He added that “We’re strongly committed to using these powerful tools that we have to support the economy during this difficult time for as long as needed, and no one should have any doubt about that.” However, the tone of the Committee’s statement changed compared previous declarations: from an optimistic mood back in September that asserted that economic activity had “picked up in recent months,” it morphed to a more cautious “Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year.” Concerns about the future of the economy remain high as COVID-19 cases continue to soar at staggering rates. The Fed warned once more that the course of the economy depends mostly on the control of the coronavirus and on fiscal policies that can support the accommodative tools used thus far.

7. The Canadian economy continues to grow but at a much slower pace. Although the unemployment rate hit its lowest since May, it only decreased by 0.1% to 8.9%, which looks meager compared to the 1.2% decrease in September. However, a senior economist at T.D. Bank Sri Thanabalasingam wrote, the great “leaps and bounds early on are now baby steps.” Economists expected 58,000 new positions, but Canadian businesses managed to create 84,000 jobs—about a fifth part of the total jobs created in September—and 69,000 are full-time employments. The slow-down comes as no surprise after some provincial governments had to reinstate COVID-19 restrictions to counter the second wave. The stricter measures led to a loss of 48,000 posts in the accommodation and food industry, of which 42,000 were lost in Quebec; the information and culture industry also took a hit in this province and Alberta. The services sector, particularly professional, scientific, and technical services; wholesale and retail trade; and educational services surpassed their pre-pandemic employment levels and compensated for the losses in the food and recreation industries. StatsCan also reported that Ontario, Alberta, British Columbia, Prince Edward Island, and Newfoundland saw employment increase; similarly, the number of self-employed Canadians rose for the first time since the beginning of the pandemic. However, economists warn that job gains may become harder to come by, particularly as the second wave of COVID-19 infections prompts new restrictions.

8. Brent and West Texas Intermediate crude oils had similar weeks. Both started below the $40 threshold and rose steadily until Thursday. Brent oil surpassed the $40 and was heading for a 6% weekly gain until Friday; it closed the week at $39.45. WTI crude oil started the week at $35.25, mounted steadily 4.5%, and drew close to the $40 mark until Thursday. On Friday, the U.S. crude prices dropped, and it closed the week at $37.14. Analysts attribute the decline in prices to the rising coronavirus cases and the unfulfilled expectations around a second stimulus package. Bob Yawger, director of energy futures at Mizuho, explained that both affect the demand for crude. “The coronavirus situation is as negative a demand indicator as you can get” and “Crude oil is very sensitive to the stimulus expectations;” when these two factors interact, the lack of fiscal support can only push down the oil demand even more.

9. The euro and Japanese yen followed similar upward trajectories against the U.S. dollar, which were briefly interrupted by a dip on Wednesday. By contrast, the euro had a rockier week: the European currency dipped into negative territory right after the trading week’s opening and did not leave until Tuesday morning. The currency climbed all Tuesday and was only interrupted by a slight drop in the evening. In the early hours of Thursday, the euro returned to negative territory and touched the week’s low; however, it resumed the ascent and by noon was again in positive territory. The European currency maintained the upward trend for the remainder of the week, reached the high of the week on Friday afternoon, and closed the week to the upside against the greenback. In contrast, the Japanese yen started the week with ups and downs, mostly in positive territory. The Japanese currency fell abruptly in the wee hours of Wednesday and struggled to move to positive territory later that morning. The yen maintained an upward trend for the remainder of the week. On Friday, the currency reached the week’s high late in the morning and closed to the upside against the greenback.

Although the pandemic took the back burner this week, it did not slow down. On Thursday, Italy recorded its highest daily number of COVID-19 infections, and per capita counts show it is faring worse than the United States. In Denmark, a mutation of the coronavirus started spreading from minks to humans, and authorities have determined to exterminate 15 million minks. The United States hit daily records of new coronavirus infections on Wednesday, Thursday, and Friday. Friday’s data surpassed the 120,000-case record set in March, in the early days of the pandemic. To this day, the virus has killed 236,000 people in the U.S., and it has infected more than 9.7 million. Experts estimate more than 305,000 cases a day by December 31, and with a complete relaxation of restrictions, COVID-19 positives could reach 686,000 per day. Economic data from Canada, China, and other countries suggests that economic recovery will not occur until the virus is under wraps.

With less than two months until the deadline to reach a Brexit deal, negotiations seemed to stall once again after British Prime Minister Boris Johnson and E.U. Commission President Ursula von der Leyen spoke on Saturday. In statements released after the call, both politicians underlined the key issues that continue to divide them: an agreement on the game rules that will secure fair competition and European Union’s access to British waters. Von der Leyen said in a tweet that “some progress has been made, but large differences remain,” and 10 Downing Street highlighted that both parties will need to “redouble” efforts next Monday when the chief negotiators meet. Without a doubt, this deadlock is unfavorable to the negotiations schedule; only a week remains before the parliaments of the European Union and the U.K. start the ratification processes for the trade and security deals.

Late Saturday morning, several news outlets called Joe Biden elected as President. Pennsylvania’s 20 electoral votes went to former Vice President Joe Biden, bringing his electoral college votes to a total of 273. Trump-friendly news outlets have encouraged President Trump to accept defeat. Fox News host Laura Ingraham said on Friday night during a live segment that “If and when it’s time to accept an unfavorable outcome in this election, and we hope it never comes, President Trump needs to do it with […] grace and composure.” Republican members of Congress have taken sides; some have tweeted supporting Trump’s distinction of “legal” and “illegal” votes, while others have criticized him. Strong Republican supporters of Trump, like former New Jersey Governor Chris Christie and former Pennsylvania Senator Rick Santorum, condemned Trump for declaring victory and claiming fraud. However, as senior advisor for the Trump campaign, Jenna Ellis, argued earlier this week: “It’s incredibly important that no matter what any of the mainstream media […] report; their calls and their projections aren’t actually what matters;” what matters is what litigation is still pending and the vote recounts. Both campaigns have started to collect funds to finance the legal expenses of the coming legal battles. Investigations dealing with the spread of misinformation and incitation will also keep authorities and media busy in the coming weeks.

Cautious investors continue taking steps to ensure that their portfolios remain well-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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