The Precious Metals Week in Review – January 8th, 2021

1. This week, the disconnect between reality and markets grew even wider. After a downhill first-day-of-the-year for the S&P 500, Dow Jones, and Nasdaq Composite, these benchmarks rebounded and reached all-time intraday highs on Tuesday, and went through the Capitol insurrection on Wednesday unscathed. Benchmarks continued to rally and established new records on Thursday; on Friday, despite the negative Nonfarm Payroll Report, only talks of a new aid package briefly shook the benchmarks.

2. For the week ending on January 2, the seasonally adjusted number of Americans filing for unemployment decreased for the third straight week vis-à-vis the previous week’s revised level. The number of initial claims totaled 787,000, a drop of 3,000 from 790,000. The revised figure for the week ending on December 26 added 3,000 claims for a total of 790,000. The four-week moving average for the week ending January 2 was 818,750, a decrease of 18,750 claims from the preceding week’s revised average. The revision of this figure for the week ending December 26 added 750 more jobless claims than estimated for a new total of 837,500 claims. This week’s Nonfarm Payroll Report informed that employers cut 140,000 jobs in December due to the steep increase in COVID-19 cases.

Although the unemployment rate remained unchanged at 6.7%, this is the first time that job losses surpassed the gains. The Labor Department’s report also noted that despite the progress made since April, the unemployment rate and the number of unemployed Americans are almost double their pre-pandemic levels. The heaviest losses happened in leisure and hospitality; gambling, and recreation; private education; the federal government sector; and local and state governments. The areas with the largest job increases were professional and business services, followed by the retail and trade sector, construction, transportation and warehousing, and health care.

3. In the United States, Democrats won control of the Senate on Wednesday after state officials completed most of the vote tallying for the Georgia senatorial-runoff race. Although both parties have the same number of Senators, Vice President Kamala Harris would give Democrats the majority as the President of the Senate. The two Republican incumbents from Georgia, Senators David Perdue and Kelly Loeffler, lost their seats to Democrats Jon Ossoff and Raphael Warnock on a tight race with margins of 1.8% and 1%, respectively. However, elected lawmakers Warnock, the first black Georgian senator, and Jon Ossoff had little time to celebrate. The Trump-organized Save America March turned into a riot and a violent occupation of the Capitol, thus overtaking news coverage in the U.S. and making the news worldwide. Thus far, those violent events have claimed five people’s lives, including a Navy veteran and a Capitol Police officer.

4. On Wednesday, what was supposed to be a procedural Electoral College vote tallying ended in tragedy after Trump supporters stormed in the U.S. Capitol. Thousands of protestors from all states met in Washington D.C. to participate in the Save America March, a two-day event that kicked off on Tuesday to protest the Presidential elections’ results in November. Despite the lack of evidence of electoral fraud, Trump and his personal lawyer Rudolph Giuliani addressed the multitude in the late morning and continued to affirm that the elections had been stolen. In reference to the unsubstantiated fraud claims and rejected lawsuits, Giuliani said in a clear invitation to violence that “If we’re wrong, we will be made fools of, but if we’re right, a lot of them will go to jail. So let’s have trial by combat.” Next, Trump addressed the crowd and said that he would not concede victory: “We will never give up. We will never concede. It doesn’t happen. You don’t concede when there’s theft involved […] We will stop the steal.” Trump’s speech used zero-sum rhetoric to embolden the crowd to fight and save the country from cheating Democrats and “weak Republicans” who failed to defend the election: “We fight, we fight like hell, and if you don’t fight like hell, you’re not going to have a country anymore.” Trump closed his speech with an invitation to walk with him to the Capitol to give the “weak Republicans” like Vice President Mike Pence “the kind of pride and boldness that they need to take back our country.”

5. The protesters walked to the Capitol without President Trump to demonstrate their disagreement with the election results and support the 147 House Members and 13 Senators who planned to object to the Electoral College votes count. However, their fervor escalated into anger and rioting when Trump supporters violently stormed the Capitol after Vice President Mike Pence refused to unconstitutionally overthrow Arizona’s Electoral College votes. At the time of the incursion, the Senate and the House debated separately the objection of Arizona’s electoral results. Lawmakers were immediately evacuated from the chambers while the Capitol Police unsuccessfully attempted to refrain the mob that outnumbered its personnel. Images show rioters posing and strolling in the Senate’s chamber, House Speaker Nancy Pelosi’s office, and other Capitol’s emblematic places. Lawmakers resumed the debates at 8:00 PM, and exiting-Senator GOP Kelly Loeffler withdrew support to the objection along with Republican colleagues James Lankford of Oklahoma, Ron Johnson of Wisconsin, Marsha Blackburn of Tennessee, Bill Hagerty of Tennessee, Cathy McMorris Rodgers of Washington, and Steve Daines of Montana. Josh Hawley of Missouri, Ted Cruz of Florida, along with four more Senators and 121 House Members, voted to uphold the objection. Later in the evening, Senator Hawley objected to Pennsylvania’s Electoral College votes; however, the Senate rejected the effort without any discussion, and only seven lawmakers voted to uphold the objection. Meanwhile, the House witnessed a heated debate that almost led to a fistfight; the session ended in the wee hours of Thursday with 282 votes against the objection and 138 for—all from GOP House Representatives.

6. Reactions to the events were not slow to come. U.S. allies were quick to express their faith in U.S. democracy and condemn the events. French President Emmanuel Macron said, “What happened in Washington DC is not America,” while German Chancellor Angela Merkel expressed anger and sadness about the events and partly blamed Trump for the debacle. The National Association of Manufacturers was the first to call Vice President Mike Pence to invoke the 25th Amendment of the U.S. Constitution to oust President Trump. On Wednesday, the head of the association said in a strongly worded letter that “The outgoing president incited violence in an attempt to retain power, and any elected leader defending him is violating their oath to the Constitution and rejecting democracy in favor of anarchy. Anyone indulging conspiracy theories to raise campaign dollars is complicit. Vice President Pence, who was evacuated from the Capitol, should seriously consider working with the Cabinet to invoke the 25th Amendment to preserve democracy.” The letter also seemed to allude to the fund-raising texts that Senators Ted Cruz and Josh Hawley sent to support their efforts to lead “the charge to fight for free and fair elections,” while the Capitol Police tried to regain control of the premises. On Thursday morning, President-elect Biden called the rioters “riotous mob, insurrectionists, domestic terrorists,” which starkly contrasted with Trump’s video on Wednesday urging his supporters to leave: “Go home, we love you, you are very special!”

7. The words and deeds of President Trump and Senators Cruz and Hawley (among others) have been successful at creating an alternate reality. Videos and declarations of rioters show their surprise at the use of violence from police. A tearful female rioter said, “This is not America. They’re shooting at us. They’re supposed to shoot BLM [Black Lives Matter], but they’re shooting the patriots.” In a similar tone, a woman who identified herself to Yahoo’s White House correspondent Hunter Walker as Elizabeth “from Knoxville, Tennessee” said in tears in a video: “I got Maced. I made it like a foot inside, and they pushed me out, and they Maced me. They pushed me out, and they maced me!” When the reporter asked her why she went into the building, she replied: “We’re storming the Capitol; it’s a revolution!” The media was quick to notice and criticize how differently the forces of order responded to the Capitol rioters in comparison to protesters in Black Lives Matter and other demonstrations. The difference was so blatant that three European security officials interviewed by Business Insider said that the insurrection looked to them like a violent coup attempt with the implicit support from sectors of U.S. federal agencies in charge of protecting the Capitol. One of the interviewees, a NATO Intelligence official, told the news outlet: “Today I am briefing my government that we believe with a reasonable level of certainty that Donald Trump attempted a coup that failed when the system did not buckle.”

8. The Canadian economy is also facing dire times due to the second COVID-19 flare-up that took off in November. For the first time since the beginning of the recovery, employment fell by 63,000 in December, the first time that job losses exceed the gains, said Statistics Canada in its monthly report. This is a big blow to the Canadian economy, where nearly 80% of the jobs lost to the pandemic had been recovered. Although the unemployment rate increased only by 0.1%, senior economist at CIBC Capital Markets Royce Mendes said that December’s report “just barely captures the tip of the iceberg in terms of the contraction in the economy,” and that job losses will likely continue through January. The report highlighted that part-time jobs declined by 99,000, and the number of self-employed workers reached its lowest level since February of 2019. In December, the services sector experienced its first fall since April, while the sectors of information, culture and recreation, and accommodation and food services faced decreases for the second and third consecutive months, respectively. In contrast, the sectors of retail trade, manufacturing, and professional, scientific, and technical services had considerable job increases. The industry of health care and social assistance is the only sector facing a deficit of personnel of 80,700.

9. Both Brent and West Texas Intermediate crude oils steadily climbed all week long and reached new highs this week. On Tuesday, the OPEC+ gave oil prices a first upward push after Saudi Arabia unilaterally agreed to further cut its quota to offset Kazakhstan and Russia’s higher production outputs. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said that his country would bring its production down to 8.125 million barrels per day by reducing output by 1 million barrels per day from February 1 until the end of March. Both Brent and WTI oils dismissed the events at the Capitol on Wednesday. That same day, oil rallied after the Energy Information Administration reported that U.S. crude inventories had decreased by 8 million in the week ending January 1. This week, Brent crude settled at $56.36, and WTI oil exceeded the $50 threshold and closed the week at $52.73.

10. The euro spent most of the week in positive territory against the U.S. dollar. The currency kicked off the first week of the year with a rapid ascent that ended in a brief visit to negative territory on Monday. By the late evening, the European currency was on the way to establishing an upward trend that lasted until Wednesday morning, when the currency touched the week’s high. Although the currency fell after peaking, it was able to reverse course by the late afternoon. Nevertheless, a descent ensued in the evening, and the euro slid into negative turf by the wee hours of Friday. The currency touched positive ground again in the late part of the morning but dove again in the afternoon, touched the week’s low, and closed the week to the downside against the greenback. The Japanese yen spent the first half of the week in positive turf against the U.S. dollar. It started the week with a short-lived climb that extended until the early morning of Monday. Then, the Japanese currency fell and spent most of Monday in negative territory; however, it reversed course and initiated a scaling by the evening. However, the yen only sustained the upward movement until Tuesday afternoon when it reached the week’s high. From there on, the currency engaged in descent and reached negative territory by Thursday evening, which took it to the week’s low by the early afternoon of Friday. The yen closed the week to the downside against the greenback.

Trump’s consent to a transfer of power came way too late on Thursday night. In a video message posted on Twitter, the President did not admit he had lost the elections but said that “Now, Congress has certified the results, a new administration will be inaugurated on January 20th. My focus now turns to ensuring a smooth, orderly, and seamless transition of power.” This is the closest President Trump has come to conceding victory. Nevertheless, this message came after the National Association of Manufacturers, GOP Representative Adam Kinzinger of Illinois, House Speaker Nancy Pelosi, and Senate Minority Leader Chuck Schumer called Vice President Pence to invoke the 25th Amendment to remove Trump from office. Although Pence has refused to do so, other voices have joined Kinzinger, Pelosi, and Schumer’s. GOP Senator Lisa Murkowski of Alaska became the first Republican senator to ask Trump for his resignation on Friday evening. In the meantime, Pelosi, Schumer, and other Democrat lawmakers are currently working on a second impeachment.

Wednesday’s events will have repercussions for the U.S. in the international arena. German Foreign Minister Heiko Maas summarized it in a tweet: “The enemies of democracy will rejoice at these outrageous images.” Lo and behold, the Capitol incident was not only met with mockery in China but gave the Chinese foreign ministry spokeswoman Hua Chunying a chance to criticize the U.S. for its double standards. In her remarks, Hua questioned the contrast between the U.S.’s reactions to Hong Kong protesters that stormed in the Legislative Council’s building in 2019 and the U.S. media’s rebuke to the mob of rioters that burst in the Capitol. While the House Speaker Pelosi called the Hong Kong protestors “a beautiful sight to behold,” and the U.S. pledged to “stand with them,” protestors in the U.S. received the monikers of “riotous mob” and “terrorists.” Hong Kong’s chief executive Leung Chun-Ying added to Hua’s reproach by mocking the U.S.’s freedom of speech after Twitter blocked Trump’s Twitter account for his “inaccurate and inflammatory posts.” Foreign policy experts have warned that China and Russia will undoubtedly exploit the dysfunctional politics of the U.S.—their greatest geopolitical rival—as platforms for domestic politics.

Market euphoria reached unprecedented levels this week as markets and stocks reached new highs while political unrest shook this country’s core. The disconnect with reality is not confined to the political realm; investors continue to privilege high-risk assets over safe-haven investments as the economy loses jobs and COVID-19 cases keep increasing worldwide. For this reason, 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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