The Precious Metals Week in Review – February 19th, 2021

1. Relative calm reigned this week in Wall Street week, while four million Texans went through a nightmarish blackout caused by winter storms, leaving at least 58 deaths on its passage. Bursting pipes and lack of drinking water have made the situation direr and prompted President Biden to ask the Federal Emergency Management Agency to expedite the major disaster declaration for the Lone Star State. Needless to say, the storms have caused severe damages to oil infrastructure that might take weeks to repair.

2. For the week ending on February 13, the seasonally adjusted number of Americans filing for unemployment increased vis-à-vis the previous week’s revised level. The number of estimated initial claims totaled 861,000, an increment of 13,000 from 848,000. The revised figure for the week ending on February 6 increased by 55,000 claims, from 793,000 to 848,000. The four-week moving average for the week ending February 13 was 833,250, a decrease of 3,500 claims from the preceding week’s revised average. Meanwhile, this figure’s revision for the week ending February 6 added 13,7503 jobless, totaling 836,750 claims. These numbers represent a setback in the job market recovery as initial claims reached the highest level in a month.

3. Treasury Secretary Janet Yellen called on again for a large stimulus package in an interview with CNBC on Thursday. Yellen said on the “Closing Bell” that despite the momentum the economy is experiencing, a large bill could do more good than harm and get the U.S. back to full employment in one year. “I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run.” When asked about high levels of inflation resulting from excessive aid, Yellen admitted it was a risk. Still, she trusted that the Federal Reserve had the tools to counter it: “Inflation has been very low for over a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve and others have tools to address.” On Friday, the Presidents of the Boston and New York Federal Reserve Banks Eric Rosengren and John Williams echoed Yellen’s opinion. They also dismissed concerns over the negative effects of the stimulus package. In an interview with Reuters, Rosengren said that the $1.9 trillion fiscal packages under consideration were “appropriately big” and added he was “much less concerned than some commentators about it being a problem of overheating the economy.” In an interview with CNBC’s “The Exchange,” Williams expressed that he was not “really concerned about fiscal support right now being excessive or anything like that. Really, what I want to see is an economy that gets back to full strength as soon as possible.” Williams added that he was not worried about the high prices of equities and asserted that those prices result from investors looking ahead into a recovered and expansive economy.

4. President Joe Biden is due to visit Pfizer’s COVID-19 vaccine manufacturing plant in Kalamazoo, Michigan, on Friday. The visit comes after the White House top medical adviser, Dr. Anthony Fauci, admitted on Tuesday that demand for the vaccine continues to outpace the supply, despite efforts from the current administration. Earlier this month, the White House announced it put the Defense Production Act into use to help Pfizer acquire additional equipment quickly in order to increase production. Extreme weather conditions have added another strain to the supply as winter storms in the U.S. have delayed the delivery of 6 million doses, said a White House official. The Senior adviser to the White House COVID-19 response team, Andy Slavitt, said that states should prepare to receive the doses expected for next week plus the backlogged jabs. Europe is also dealing with supply delays as Pfizer has yet to deliver 10 million doses that were due in December of last year.

5. On Friday, the virtual meetings of the G7 commenced with a commitment from its members—France, Germany, Italy, the U.K., Japan, Canada, and the United States—to “work together and with others to make 2021 a turning point for multilateralism.” Part of this multilateral agenda is the pledge to assign $7.5 billion in funding for COVAX, an international initiative seeking to facilitate equitable access to the COVID-19 vaccine. The announcement comes after the White House said on Thursday that the United States would contribute $4 billion to this cause—half of that sum “almost immediately” and the remaining $2 billion in installments throughout 2022. Other countries joined the United States and pledged to donate $3.5 billion more. Nevertheless, the call from France’s President Emmanuel Macron for each G7 member to urgently send up to 5% of their current vaccine stocks to the developing world fell on deaf ears. The seven participants also expressed their willingness to work with China and other G20 countries to support “a fair and mutually beneficial global economic system for all people.”

6. After the meeting, some G7 members gathered virtually with other renowned world leaders for the Munich Security Conference. President Joe Biden used the occasion to present the new administration’s international agenda and touched on two key points: mending relationships with allies and holding China accountable. In his speech, Biden vowed to “earn back our position of trusted leadership” and added that “America is back,” signaling an emphasis on multilateralism and the end of belligerent diplomacy with Europe and NATO. Biden called on American allies to hold China accountable for its “government’s abuses and coercion that undercut the foundations of the international economic system.” He added that “U.S. and European companies are required to publicly disclose corporate governance structures […] and abide by rules to deter corruption and monopolistic practices,” therefore, “Chinese companies should be held to the same standard.” Biden recognized that although Russia represents challenges that “may be different than the ones with China, […] they are just as real,” and upholding democratic values was key to “push against those who would monopolize and normalize repression.”

7. In Canada, the real estate market has defied all predictions. At the beginning of the pandemic, the federal housing agency—the Canada Mortgage and Housing Corp.—said a worst-case scenario of an 18% drop in housing prices was possible. Prices fell during March and April, but like in the U.S., they went up again as families re-evaluated their housing arrangements. Unexpectedly, prices for condos cratered while selling prices surged in cottage country. Telecommuting led some to sell and buy in smaller towns and others to buy a second property in rural vacationing areas near Vancouver, Alberta, Manitoba, Québec, and Saskatchewan. Of all provinces, Ontario has seen the sharpest price increases as the home price index rose by more than 30% in some areas; additionally, home resale numbers registered several records last year, and active listings are lacking. The standstill in commutes, traveling, and entertainment that came with the pandemic has also meant that people have been able to pay off credit card debts and loans more easily, as well as take advantage of low-interest rates to refinance debt. Nevertheless, cheaper debt has undeniably fueled the real estate market and raised home prices, which means that urbanites in Victoria, Vancouver, Toronto, Montreal, and Ottawa are taking longer to save for minimum down payments. The real estate reshuffling effects have also affected rentals in big cities, and the sink in immigration has contributed to the situation.

8. Oil prices fell below the $60 threshold this week due to the winter storms hitting the United States. Power outages, equipment failures, and frozen over wellheads crippled U.S. oil production, and experts think it could take weeks to restart frozen wells and repair the damages. Despite taking a hit, oil prices have increased more than 20% since the beginning of the year, and according to JPMorgan, there could be room for more gains. In an interview with CNBC’s “Street Signs Asia,” JPMorgan global market strategist Kerry Craig estimated that prices could increase by $5 to $10 in the current environment. Both Brent and West Texas Intermediate crude oil touched the week’s high on Thursday; the former reached $65.52 at its highest, while the latter rose to $62.26. Nevertheless, both lost ground on Friday’s trading and finished the week to the downside; Brent crude settled at $62.84, while WTI oil fell below the $60 mark and closed at $59.01.

9. The euro and the Japanese yen had v-shaped weeks against the U.S. dollar, both touching the week’s low on Wednesday and regaining ground on Thursday and Friday. The European currency briefly dipped after opening but started a slow upward trend that took the currency to the week’s high on Tuesday at noon; nevertheless, it fell quickly to negative territory after peaking. Although the euro managed to slow down the descent, it continued to fall until the mid-afternoon of Wednesday, when it reached the week’s low. Right after, the euro made a small attempt at reversing course, followed by a successful try that took the currency to the second-highest point of the week on Friday morning. For the remainder of the day, the European currency tried to maintain the level; despite failing, the euro managed to close the week to the upside against the greenback. The Japanese yen engaged in a descent right after opening on Sunday evening and spent all week in negative territory. The fall was briefly interrupted on Tuesday morning with an ascent, but the yen resumed the fall and reached the week’s low at the stroke of midnight on Wednesday morning. In the wee hours of Wednesday, the Japanese currency reversed course and started a slow but steady ascent. The yen accelerated the ascent pace on Friday morning but could not keep the stride; despite that, it closed the week to the upside against the greenback.

Despite the G7’s willingness to help low and middle-income countries in their vaccination efforts, the help of the seven will arrive too late for some countries. As reported in The Globe and Mail, Serbian President Aleksandar Vucic exemplifies the dilemma some heads of state find themselves. In an interview he gave last week to Euronews, he explained that he decided to accept Russian and Chinese immediate help instead of waiting for European Union donations because “We needed to take care of ourselves.” According to the Serbian leader, the decision has already saved 1,000 lives.

The G7’s tardy announcement of help in the form of funding comes months after India, Russia, and China first offered to ship their domestically produced vaccines to struggling countries. China’s Sinovac inoculation doses first arrived in Serbia in mid-January. This week, Belgrade and Moscow signed an agreement to manufacture 20 million doses of the Russian jab Sputnik V in Serbia, with the intention of making this country the production center for the Balkan region. In its turn, Serbia has used its increasing supplies to immunize Serb populations in neighboring Kosovo and Bosnia-Herzegovina, who still wait for provisions from COVAX and the European Union. While Western countries stockpile Pfizer’s and Moderna’s vaccines, China, India, and Russia use this form of soft power to increase their influence in Africa—a region they have been disputing for years. This week, Zimbabwe received 200,000 doses of the Sinopharm vaccine in boxes that read “China Aid. For Shared Future,” while Moscow continues to publicize new orders and clearances for the Sputnik V in Algeria, Guinea, Togo, and Tunisia.

While China, India, and Russia resort to vaccine diplomacy to further their interests in critical regions, Canada is exercising traditional diplomacy to condemn Facebook’s decision to impede Australians from sharing news on the platform. Facebook’s determination comes after Australia required Facebook and Google to pay news publishers for posting their content. While Google agreed to negotiate with Aussie news publishers, Facebook reaffirmed its position and blocked news contents from the platform as of Thursday morning. On Thursday, Canada’s Heritage Minister Steven Guilbeault said in a virtual news conference that he communicated last week with his counterparts in Germany, Finland, France, and Australia to consider presenting a unified front regarding several issues related to these media giants. Guilbeault added that the coalition could grow to 15 countries and wondered whether Facebook would dare to cut ties with Germany, France, Canada, Australia, and other countries once they present their stance jointly.

As the disconnect between the struggling economy and the stock market continues, many continue purchasing physical precious metals. Savvy investors think of the ownership of physical precious metals as a means of portfolio diversification, and thus, as a shield from the uncertainty of equity markets. 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.

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Precious Metals International, Ltd.

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