The Precious Metals Week in Review – January 22nd, 2021

1. This week, markets seemed to react positively to the new U.S. administration. Optimism around President Joseph Biden’s role in expediting the vaccine rollout and bolstering the economy led the stock market to a winning week. Nevertheless, uncertainty levels remain high as the coronavirus continues to mutate and countries experience setbacks in their vaccination plans. Although Biden’s inauguration brings an opportunity to mend tense relations between states, tensions and disagreements of the past continue to shape the U.S.’s international policy.

2. For the week ending on January 16, 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 900,000, a drop of 26,000 from 926,000. The revised figure for the week ending on January 9 decreased by 39,000 claims for a total of 926,000. The four-week moving average for the week ending January 16 was 848,000, an increase of 23,500 claims from the preceding week’s revised average. The revision of this figure for the week of January 9 subtracted 9,750 jobless claims for a new total of 824,500 claims.

3. The presidential election saga reached its final episode with President Biden’s inauguration on Wednesday. However, his inauguration departed from tradition as ex-President Trump missed it, making it the first presidential investiture in which the predecessor was absent since 1869. Although former President Trump left the White House without resistance, he did not depart silently; he threw himself a farewell ceremony on Wednesday morning at Joint Base Andrews in Maryland, where a 21-guns salute greeted him amidst several hundreds of friends and supporters. Former Vice President Mike Pence and former Senate Majority Leader Mitch McConnell missed Trump’s parting event and instead participated in Biden’s inauguration. At his send-off, Trump said it had been his “great honor and privilege” to serve as President and added that “we will be back in some form.” Both ceremonies took place without disturbances, thanks to the effort and coordination of 26,000 National Guard troops deployed in Washington D.C. prior to the inauguration. Trump’s presidency ended on a low note after the Capitol’s riot on January 6, a vaccination campaign that had failed to accomplish targets, and more than 400,000 coronavirus deaths.

4. While Trump chose to close his presidency by signing a flurry of pardons, Biden began his administration with a spate of executive orders. Some of these orders prolonged policies of the previous administration, like the extension of moratoriums for evictions and student loans; some reversed Trump’s legacies, like the wall construction on the U.S.-Mexico border; and others instituted new measures, like the launch of the “100 days masking challenge” asking Americans to wear face masks for 100 days. Nevertheless, analysts could not help to notice that multilateralism is back on the White House’s agenda. On Wednesday, President Biden brought back the United States to the World Health Organization and renewed U.S. participation in the Paris climate accord, receiving praise from foreign leaders. British Prime Minister Boris Johnson reacted on Twitter, saying that “rejoining the Paris Agreement is hugely positive news.” French President Emmanuel Macron said that the United States’ return to the Paris accord would strengthen the global resolve to protect our planet. On Thursday, Biden’s top pandemic adviser Anthony Fauci told during a virtual meeting of the World Health Organization that the United States will remain a member of the WHO, and that the new administration will “fulfill its financial obligations to the organization” and resume “regular engagement.” According to the White House, Vice President Kamala Harris “emphasized the importance of making America safer through global cooperation” in a conversation with WHO’s Director-General Tedros Adhanom Ghebreyesus, thus signaling this noticeable shift in U.S. politics.

5. Despite the changes President Biden undertook on his first day as President, one aspect is not likely to change: the United States’ stance on China. Avril Haines, Biden’s pick for Director of National Intelligence (DNI), said in her confirmation hearing on Tuesday: “Our approach to China has to evolve and essentially meet the reality of the particularly assertive and aggressive China that we see today.” Haines later added, “I do support an aggressive stance, in a sense, to deal with the challenge that we are facing.” Haines also expressed her concern about cyber-attacks and the need to find mechanisms to deter attackers and punish them during the hearing. In this regard, the new head of the DNI recalled the SolarWinds attack, attributed to Russia, suggesting a possible change in the softer stance towards Russia of the previous administration. GOP leaders later reinforced Haines’ approach to China after it announced sanctions against 28 members of the previous administration, including former Secretary of State Mike Pompeo, former national security advisor Robert O’Brien, and former trade advisor Peter Navarro. Experts expect a change in tone in exchanges with China, but not a policy change; Taiwan and human rights will remain top priorities. Nevertheless, the Chinese Foreign Ministry spokeswoman Hua Chunying expressed Beijing’s hopes for improving bilateral relations: “I believe if both countries put in the effort, the kind angels can triumph over evil forces.”

6. On Friday, President Biden’s pick for head of the Treasury Department, Janet Yellen, received approval from the Senate’s Finance Committee with a 26-0 vote. Despite the unanimous vote, Yellen has already received pushback from lawmakers. On Tuesday, Yellen expressed that the Biden administration would seek quick passage of the almost $2 trillion pandemic stimulus package during her confirmation hearing. Yellen told the Finance Committee that “more must be done… Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later.” As expected, Republicans debated the proposed $1,400 checks and the minimum wage increase to $15 at a time when small businesses have closed; they argued that increasing the minimum wage would exacerbate unemployment. Despite the concerns over a costly pandemic relief plan that follows $3 trillion packages issued last year, Yellen still managed to break gender barriers again; on Thursday, she became the first female Treasury Secretary after being the first female at the helm of the Federal Reserve under the Obama administration.

7. One of Biden’s executive orders has Alberta Premier Jason Kenney calling on Prime Minister Justin Trudeau for retaliatory measures and direct compensation from the U.S. for the cancellation of the Keystone XL pipeline project. In a letter dated Tuesday, Kenney told Trudeau that the undertaking has already cost the Albertan government and the pipeline builder $1.5 billion, with an additional $6 billion in loan guarantees. The project sought to alleviate bottlenecks in export pipelines that push oil prices down and force companies to use railways to deliver oil. Kenney highlighted in his letter that the Keystone XL pipeline “will be the first […] of its kind to operate at net-zero emissions on its first day of operations and will purchase 100 percent of its power load from renewable energy sources.”

8. On Friday, Trudeau expressed his disappointment with the cancellation and said he would discuss the topic with President Biden on a phone call scheduled for Friday evening—Biden’s first phone conversation with a foreign leader. “Obviously, the decision on Keystone XL is a very difficult one for workers in Alberta and Saskatchewan who’ve had many difficult hits. […] I will express my concern for jobs and livelihoods in Canada, particularly in the west, directly in my conversation with president Biden.” However, Trudeau added that climate change is also a priority in his agenda; despite his support for the project, he has said on past occasions that it is time to respect Biden’s decision and focus on other subjects. Kenney’s critics underscored that the Keystone XL pipeline depended on Trump’s reelection and that the Albertan Premier was fully aware of the risks involved when he decided to invest in the project. In the words of Kathleen Ganley of the New Democratic Party: “Premier Kenney made a $7.5-billion bet on Trump’s reelection. Unfortunately for Albertans, Jason Kenney lost that bet, and now he’s trying to blame everyone but himself for losing billions of Albertans’ money. The responsibility rests squarely on his shoulders.”

9. Oil prices climbed steadily and reached the week’s high on Wednesday. Brent oil peaked at $56.64, and West Texas Intermediate crude quoted $53.79 at its highest. However, the rally came to a halt as news of new lockdowns worldwide and China, in particular, emerged and reignited fears of low demand. Biden’s cease to the Keystone XL pipeline and suspensions of new gas and oil leasings on U.S. public lands and waters for 60 days are also behind the prices drop. Both crude oil benchmarks closed the week to the downside, although both remained above the $50 threshold. Brent closed the week at $55.21 and WTI at $51.98.

10. The euro gained against the U.S. dollar this week. At the opening, the European currency slowly fell to negative territory and touched the week’s low until midday Monday. However, the currency recovered and steadily climbed until the early morning of Wednesday. From there on, the euro fell until the early afternoon bordering the week’s low. On the same day, the currency was able to recover and establish an upward trend that led to the week’s high on Friday morning and to close the week to the upside against the greenback. The Japanese yen briefly fell after opening against the U.S. dollar and managed to quickly recover and climb until the wee hours of Tuesday. Next, the currency dived abruptly into negative turf to the week’s low until it managed to reverse course close to noon. The yen steadily escalated until midday Thursday when it reached the week’s high. However, the ascent turned into descent and led the Japanese currency to close to the week, far from its highest level, but to the upside against the greenback.

While the new coronavirus variants continue to spread, vaccine campaigns worldwide keep encountering obstacles. It seems that Pfizer now plans to deliver fewer vials to the U.S. and Europe than initially agreed. After pharmacists discovered that they could get six doses out of each vial instead of five, Pfizer realized it did not need to ship as many vaccine containers to complete the 200 million doses it committed to producing for the U.S. However, pharmacists in the United States have reported having issues with extracting the extra dose, which requires syringes that minimize waste. Many vaccination sites across the country have confirmed they do not have access to the so-called low dead volume syringes. In Europe, Pfizer’s new accounting is becoming problematic as countries are receiving fewer vials, and vaccination centers have had to cancel appointments for lack of enough jabs to inoculate patients. Starting next week, federal vaccine allocations for each state could reflect Pfizer’s estimates of six doses per vial, and vaccination sites continue to work with whatever syringes they have at their disposal.

On Friday, British Prime Minister Boris Johnson delivered bad news to the world. The new coronavirus variant identified last year in Britain is not only more contagious but also deadlier. Preliminary studies based on small samples suggest that the new variant can increase the risk of death by 30%. Although Britain’s chief scientific adviser, Sir Patrick Vallance, cautioned about a great deal of uncertainty around the numbers in the said studies, he underscored that scientists’ conclusions raise serious concerns over the increased mortality and transmissibility of this particular variant. Concerning the vaccination effort, Mr. Vallance declared that thus far, the vaccine used in the U.K. has proven to be effective against the British variant. Still, he expressed less confidence about the immunization’s effectiveness against the Brazilian and South African variants.

As the coronavirus continues to mutate and spread, investors are reminded of the fragility of economic recovery and the volatility of undiversified investments. Savvy investors know well the role that safe-haven investments play in protecting portfolios; therefore, they 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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