The Precious Metals Week in Review – January 15th, 2021

1. At the beginning of the week, stocks were brought to a reckoning; on Monday, stocks dropped as concerns that the recent stock rally went too far and authoritative voices said that corrections would be coming soon. For the middle part of the week, new highs in the 10-year and 30-year Treasury bond yields and technology led the stock market rallies; however, it closed to the downside after President-elect Biden’s first stimulus bill pushed stocks downwardly. While the announcement of Biden’s fiscal support package boosted oil prices on Thursday, this sign of recovery contrasted with the Labor and Commerce Departments’ latest reports, which painted a rather dire picture for the retail sector and unemployment.

2. For the week ending on January 9, the seasonally adjusted number of Americans filing for unemployment increased vis-à-vis the previous week’s revised level after declining for three consecutive weeks. The number of initial claims totaled 965,000, a climb of 181,000 from 784,000. The revised figure for the week ending on January 2 decreased by 3,000 claims for a total of 784,000. The four-week moving average for the week ending January 9 was 834,250, an increase of 18,250 claims from the preceding week’s revised average. The revision of this figure for the week of January 2 subtracted 2,750 jobless claims for a new total of 816,000 claims.

3. On Wednesday, the House of Representatives impeached President Trump for the second time. Last week, President-elect Joe Biden’s ratification ended in tragedy with a riot that leaves now six fatal victims in its wake. The four-page article of impeachment maintains that after months of making false claims of widespread fraud, President Trump incited his supporters at the Save America rally to march to the Capitol. As a result, the crowd attempted to interfere with the ratification session, which ended in the Capitol’s breaching and vandalization, killing law enforcement personnel, threats to Congress members, and destruction. Before opting for impeachment, Democrats sought to exhaust their options by first asking President Trump for his resignation and then requesting Vice President Pence to invoke the 25th Amendment. Ten GOP Representatives sided with the Democrats making this process the most bipartisan impeachment effort in the history of the U.S.; however, reports emerged saying that more Republicans would have supported the initiative had it not been for fear of death threats. Although the Senate’s majority leader Mitch McConnell has said that the Senate will not debate the impeachment article before January 19—a day before Biden’s inauguration, Trump would still be impeachable after he leaves office, which would ban him from running for public office again.

4. On Thursday, President-elect Joe Biden unveiled his economic plan to counter the COVID-19 financial crisis. At a price-tag of $1.9 trillion, the new coronavirus stimulus package dubbed the “American Rescue Plan” provides additional financial support for families and firms. The measure extends the eviction moratorium and increases the federal unemployment benefit until the end of September; it also includes direct payments of $1,400 to most Americans, increases the federal minimum wage to $15, and earmarks $50 billion for COVID-19 testing, among other things. President-elect Biden acknowledged the high cost of the stimulus bill; however, he highlighted that “The consensus among leading economists is, we simply cannot afford not to do what I’m proposing.” Even though the bill will surely find opposers among GOP lawmakers, some have applauded the measure, among them Marco Rubio of Florida. While this plan seeks to provide support until the COVID-19 vaccine is widely available, the second part of Biden’s economic agenda—which will be announced in February—will address longer-run goals, like infrastructure, job creation, and climate change.

5. On Tuesday, the Department of Homeland Security announced in a series of tweets that the borders between Canada, the United States, and Mexico would remain closed until February 21 “In order to continue to prevent the spread of COVID.” On the same day, the U.S. issued new rules for international travelers and is now mandating negative COVID-19 tests to enter the country; the measure comes a week after Canada imposed similar restrictions. With this new extension, the Canada-U.S. border will be close to completing a year of closures; however, the border remains open to “essential trade & travel,” and the DHS continues to work “closely with our counterparts in Mexico and Canada to identify appropriate public health conditions to safely ease restrictions in the future and support U.S. border communities.”

6. Johnson & Johnson’s coronavirus vaccine has produced encouraging results in its early trial stage. Compared to Pfizer’s and Moderna’s jabs, which require two doses, J&J’s requires only one, significantly simplifying logistics for health-care providers. Of the 805 volunteers in the study that received the vaccine, all produced “sustainable antibodies,” said the chief scientific officer at J&J, Dr. Paul Stoffels, in an interview with CNBC. The results of the stage-three trial with 45,000 participants are expected for later this month, and the Food and Drug Administration’s authorization could come in February; around the same time, the AstraZeneca-Oxford University vaccine should report trial data to the FDA to get the clear in the U.S. The good news comes at a moment when new variants of the coronavirus are proliferating worldwide and after a series of complaints from health officials and citizens in the U.S. have unveiled considerable flaws in the planning of Operation Warp Speed. Europe is also experiencing delays with its inoculation efforts. On Friday, Pfizer announced that it would delay the vaccine delivery in the Old Continent while it increases its plant production capacity in France.

7. Expectations around the new aid package boosted West Texas Intermediate oil prices on Thursday and took it to a new high since February last year, while Brent crude reached the 11-month high on Wednesday. Anticipation around the positive effects of the stimulus on oil demand further supported oil prices, as Brent and West Texas Intermediate crude oils continued to quote above the $50 mark this week. Nevertheless, concerns over China’s oil demand pushed both benchmarks in the opposite direction after reports of high counts of COVID-19 infections in this country sparked fears of new lockdowns. Brent crude closed the week at $55, and WTI settled at $52.04.

8. The euro spent the entire week in negative territory against the U.S. dollar. The European currency dropped right after opening on Sunday evening and unsuccessfully attempted to recover by Monday’s early morning. The euro did not show real signs of recovery until Tuesday afternoon when it started climbing to reach the week’s high—close to Sunday’s opening levels—by the evening of that day. Nevertheless, the currency quickly fell in the morning of Wednesday and slowed down before the end of the day. On Thursday, the euro fell deeper in the afternoon and later regained ground; however, the currency started a downward trend that prevailed until Friday, and it touched the week’s low at closure. The euro closed the week to the downside against the greenback. The Japanese yen had a better week against the U.S. dollar as it managed to spend a few days on positive territory. The Japanese currency quickly fell after opening, slowed down, and dived deeper again, reaching the week’s low by Monday afternoon. It took two recovery attempts that spanned over the remainder of Monday and all morning Tuesday before the yen could reverse course and leave negative territory by the evening. The currency continued to climb and reached the week’s high in the wee hours of Wednesday. However, it dropped after peaking and entered and exited negative turf for the rest of the day until the early hours of Thursday, when it sunk even further into negative ground. On Thursday afternoon, the yen was able to reverse course, reach positive turf, and peak close to the week’s high by the early evening. Then, the currency fell again, returned to previous levels, and fell again by Friday afternoon. Despite the fact that the yen closed to the downside against the greenback, it remained on positive turf.

While December marked the third consecutive month of industrial growth in the U.S. with an increase of 1.6%, the real state and retail sectors are hitting a rough patch. On Friday, the Department of Commerce reported that Americans continued to cut back on spending in December for the third straight month. The decline, estimated at 0.7%, is consistent with the decrease of 33% in visits to brick-and-mortar stores that Sensormatic Solutions registered for the six-week holiday period when compared with last year. This trend only strengthens the wave of closures that gained momentum in the previous year with the pandemic. In 2020, more than three dozen retail companies filed for bankruptcy protection, among them, Lord & Taylor, Neiman Marcus, and J.C. Penney. In February of last year, Macy’s announced it would close 125 department stores nationwide; last week, the firm notified the employees of the 45 stores that will be closing in the first half of 2021 of the shutdown. This surge in closures is also felt in the real state sector as more and more stores are vacated.

In Canada, the real state sector is experiencing a very unusual year as Torontonians and Québec City residents are looking to flee their respective cities. According to Treat Hall, an Ontario real-estate broker, many “buyers from Toronto […] have an acute sense of urgency about wanting to get out of Toronto” and are buying in nearby towns. In 2020, monthly sales volumes doubled the already strong numbers of 2019 for a good part of the year, thus sending the market into overdrive. According to Statscan, “Personal health, the ability to work remotely and higher housing costs are among the most important factors contributing to the decision of many Canadians to continue (or to no longer continue) living in large urban centres hardest hit by the pandemic.” The number of Canadians working from home reached 4.8 million by December, most of them white collar-workers in the sectors of finance and insurance, public administration, and professional and scientific services. Although this means that the mortgage business grew in 2020 and will likely continue to do so this year, this trend is raising prices for locals in rural areas, making it close to impossible for them to become homeowners.

This week, investors seemed to wonder for the first time if the stock market euphoria had not gone too far. In the meantime, President-elect Biden issued a stimulus bill, COVID-19 cases continued to rise worldwide, and new and more dangerous coronavirus variants have been identified and are currently spreading. Fortunately, 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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