The Precious Metals Week in Review – December 31st, 2020

1. This week closed the year with two fresh record highs for the Dow Jones and S&P 500—two clear reminders of the market euphoria that dominated 2020 while the economy crumbled in the grip of the coronavirus. Nasdaq gained about 43% this year, the Dow Jones 6%, and the S&P 500 climbed 66% from its lowest in March to post a year gain of 6%. However, one must bear in mind that fiscal and monetary stimulus meant to fight off massive unemployment levels and reactivate the economy fueled these spectacular gains. Although the Department of Labor’s weekly employment report relayed a decrease in unemployment insurance claims for the second consecutive week, the year ended with 787,000 new applications.

2. For the week ending on December 26, the seasonally adjusted number of Americans filing for unemployment decreased again vis-à-vis the previous week’s revised level. The number of initial claims totaled 787,000, a drop of 19,000 from 806,000. The revised figure for the week ending on December 19 added 3,000 claims for a total of 806,000. The four-week moving average for the week ending December 26 was 836,750, an increase of 17,750 claims from the preceding week’s revised average. The revision of this figure for the week ending December 19 added 750 more jobless claims than estimated for a new total of 819,000 claims.

3. Efforts to challenge the U.S. election results continued this week as the day for President-elect Joe Biden’s confirmation approaches. Texas House Representative Louie Gohmert and Arizona electors sued Vice President Mike Pence in federal court in an effort to allow him to choose which votes to count on January 6, the day the Congress convenes to tally Electoral College votes. The lawsuit states that Pence, as the presider of the session, “has the exclusive authority and sole discretion to open and permit the counting of the electoral votes for a given state, and … where there is objection to any single slate of electors, to determine which electors’ votes, or whether none, shall be counted.” On Tuesday, Pence declined to join Gohmert’s efforts, which led the Republican Senator to request an expedited response from Pence to the lawsuit. However, attempts to dispute the election results are not confined to the House. Despite calls from Senate Majority Leader Mitch McConnell to abstain from challenging the results, Republican Senator Josh Hawley declared on Wednesday his intentions to object to Biden’s win. Hawley is the first Senator to publicly assert that he will challenge the results, leading to hours-long debate and compelling the Senate to vote over the objection. Despite GOP Senator Ben Sasse’s calls to abstain from objecting to the certification of the Electoral College’s votes, media outlets reported on Thursday that at least 140 House Republicans plan to veto the vote tallying.

4. The Canadian federal government has announced new test requirements for air travelers entering the country. Passengers will be required to show proof of negative PCR tests—which can detect the presence of viral RNA—performed three days prior to arrival. Dominic LeBlanc, Minister of Intergovernmental Affairs, announced the measure; however, he did not say when it will come into effect. The enforcement of the mandatory 14-day quarantine will continue, and the number of border officers in airports will be increased “to ensure that travelers understand their quarantine obligations.” Failure to comply with quarantine rules could cost travelers up to $750,000 in fines or up to 6 months in jail. Despite applause for the new regulation, Conservative Parliament Members were quick to highlight that the lack of clarity concerning the new measures was “causing panic among Canadians currently abroad,” said Michelle Rempel Garner and Pierre Paul-Hus in a press release. The new set of rules comes after reports of a new coronavirus variant detected in Britain, South Africa, and as of yesterday, the United States; and coincided with a new daily record of 3,328 new infections on Thursday in Ontario.

5. U.S.-China relations continued to sour this week after two U.S. warships sailed through the Taiwan Strait on Thursday. This is the second time this month U.S. ships sail this area drawing anger from Beijing, who claims Taiwan as Chinese territory. While the U.S. Navy maintained that the warships “conducted a routine Taiwan Strait transit Dec. 31” without violating international law, the Chinese Defense Ministry qualified the actions as threats to peace and a provocation to Chinese sovereignty. The U.S. Navy added that “The ships’ transit through the Taiwan Strait demonstrates the U.S. commitment to a free and open Indo-Pacific. The United States military will continue to fly, sail, and operate wherever international law allows.” The Chinese Defense Ministry retorted that the ship’s passage sent a wrong message of support to Taiwan and that Beijing is well aware of U.S. actions and is ready to respond: “The Chinese People’s Liberation Army maintains a high level of alert at all times, responds to all threats and provocations at all times, and resolutely defends national sovereignty and territorial integrity.” The first mission of this kind happened on December 19 and was also rebuked by the Chinese government.

6. News on the coronavirus vaccine front abounded this week with the authorizations for AstraZeneca’s and Sinopharm’s jabs. On Wednesday, British regulators issued approval for the AstraZeneca-Oxford University inoculation, which—unlike Pfizer’s and Moderna’s—can be stored in regular refrigerators and has a lower price tag. The refrigeration requirements certainly make it easier to distribute to rural areas, nursing homes, and developing countries. In this regard, AstraZeneca has stated that it will produce 3 billion doses on a nonprofit basis during the pandemic and will keep prices low “in perpetuity” for low and middle-income countries. On Wednesday, the pharmaceutical said it can start producing 2 million doses a week. On a similar note, Chinese health authorities gave clearance to state-owned Sinopharm’s coronavirus vaccine for use in the general population on Thursday. Studies suggest that Sinopharm’s immunization is 79.34% effective; however, authorities did not disclose information about the number of participants involved in the trials or the data sets that had produced those results. Sinovac, another Chinese pharmaceutical, has concluded the trial stage in Brazil and Turkey; however, it has postponed the reporting of results until next month.

7. On Wednesday, lower oil stock levels in the U.S. and authorizations of two new coronavirus vaccines contributed to boosting oil prices, while gasoline prices reached a nine-month high. Although oil reserves in the U.S. remain 10% higher than in the last week of 2019, prices rallied on Wednesday after a report from the Energy Information Administration relayed a decrease in crude inventories of 6.1 million barrels in the past week. Prices could wobble in the first weeks of the new year as OPEC+ countries will increase production quotas by 500,000 barrels per day starting January. Brent crude is readying to close the year at $51.72, and West Texas Intermediate oil settled at $48.42; both benchmark oils fell more than 20% in 2020.

8. The euro had a hectic week against the U.S. dollar. The currency peaked right after opening on Sunday evening and briefly dipped to the week’s low in negative turf by midnight. The euro quickly recovered and initiated an ascent that lasted until Monday morning. Despite falling, peaking, and dropping again on Monday, the European currency started an upward trend that took it to the week’s high in the early hours of Thursday. Nevertheless, a deep dive ensued, and the euro bordered the week’s low. The European currency is readying to close the week and the year to the downside against the greenback. The Japanese yen peaked against the U.S. dollar on Sunday and plummeted on Monday morning, touching the week’s low in negative territory. From there on, the yen engaged in an upward trend that brought the currency back to positive turf by the wee hours of Wednesday and led it to the week’s high by the early afternoon. After that, the Japanese currency briefly dwindled and recovered. Despite falling again, it closed the week to the upside against the greenback.

Delays in the vaccination schedule have earned Operation Warp Speed criticisms from experts. Specialists have blamed the situation on the lack of federal support in the vaccine rollout, which has resulted in disparate responses from states. The Trump administration expected to inoculate 20 million American’s by the end of the year; nevertheless, only 2.8 million have received the jab thus far. According to the Center for Disease Control and Prevention (CDC), 12.4 million doses have been shipped, which means that setbacks are not only occurring at the federal level. Most importantly, state governments are struggling to deal with the current health crisis while, at the same time, financing the hiring of enough staff to administer the vaccines. Attitudes of the general public also seem to play against immunization efforts. Although the motives have not been yet disclosed, The Washington Post reported that a health-worker in Milwaukee intentionally spoiled 57 vials containing more than 500 doses of the vaccine.

This week, debates about the sum of the stimulus checks continued to divide lawmakers. After Trump agreed to sign the bill on Sunday, the House of Representatives voted 275-134 to increase stimulus checks from $600 to $2,000. On Tuesday, Majority Leader Mitch McConnell—a vigorous opponent of the measure—introduced a competing piece of legislation intending to please the White House, but most importantly, as an attempt to end deliberations on the topic. On the one hand, McConnell’s double strategy blocked the debate on the House’s legislation by not allowing its discussion before swearing the new Congress on Sunday. On the other hand, the competing bill contained two non-negotiable issues for Democrats—a new voter fraud commission and the elimination of social media legal protections—thus ensuring Democrat rejection of the proposal and the end of the discussion on the stimulus checks.

President Trump’s flurry of pardons has caused outrage among the human rights community. On Wednesday, United Nations experts have condemned Trump’s absolution of four Americans convicted of killing Iraqi citizens as a violation of international law. The four men worked as contractors for Blackwater, a security firm owned by the Education Secretary’s brother, when they opened fire in a Baghdad square and murdered 14 weaponless civilians in 2007. As reported by Reuters, Jelena Aparac, the chair of the U.N. working group on mercenaries, claimed that the pardon of the Blackwater contractors was an affront to justice, the victims of the massacre, and their families. Additionally, Aparac said that “these pardons violate U.S. obligations under international law and more broadly undermine humanitarian law and human rights at a global level.” Commander of the U.S. forces General David Petraeus and U.S. Ambassador in Iraq back in 2007 have also rebuked the President´s pardons as “hugely damaging,” as they signal to the world that “Americans abroad can commit the most heinous crimes with impunity.”

Market euphoria continued to entice investors to ditch safe-haven investments while the COVID-19 cases kept increasing worldwide. However, as experts have warned, the pandemic is far from over, and the harmful effects of new relief packages on the value of money continue to loom large. Therefore, savvy investors continue to regard gold and silver as shields to protect their capital and diversify their portfolios. 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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