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

1. Tense diplomacy, jittery markets, and volatility marked this week. On Tuesday, the Department of National Intelligence declassified a report dealing with foreign interference in the U.S. Presidential elections of 2020, setting the tone for conversations with foreign powers for this and coming weeks. On Tuesday and Wednesday, the Federal Open Market Committee convened, and markets followed the committee’s decisions closely. On Wednesday, Federal Reserve Chairman Jerome Powell asserted that the central bank would not act preemptively based on projections and that the FOMC would need to see material and sustained inflation moving above the 2% goal before changing its policy. Although the statement reassured the markets on Wednesday, the Dow Jones and the S&P 500 took a hit and closed the session to the downside on Friday.

2. For the week ending on March 13, the seasonally adjusted number of Americans filing for unemployment rose vis-à-vis the previous week’s revised level. The estimated number of initial claims totaled 770,000, an increase of 45,000 from 725,000. The revised figure for the week ending on March 6 grew by 13,000 claims, from 712,000 to 725,000. Meanwhile, the four-week moving average for the week ending March 13 was 746,250, a drop of 16,000 claims from the preceding week’s revised average. This figure’s revision for the week ending March 6 rose by 3,250, totaling 762,250 claims. The number of Americans who cannot claim unemployment benefits and who applied for Pandemic Unemployment Assistance decreased for the week closing on March 13. This unadjusted figure fell by more than 196,250 applications, from 478,914 in the week ending March 6 to 282,394 by March 13.

3. After its two-day meeting on Tuesday and Wednesday, the Federal Open Market Committee voted to continue with its policy’s core tenets: keeping short-term borrowing rates steady near zero while continuing its monthly bond purchases of $120 billion. However, one thing changed, namely, the FOMC’s projections. The Committee’s GDP projection for the last quarter of 2021 is now 6.5%, up by 2.3% from the 4.2% forecasted in December of 2020. The Committee members also adjusted their unemployment expectations to 4.5% from its current 6.2% level, compared to the 5% estimated in December. Inflation, the biggest point of contention among experts and analysts, is expected to increase transitorily above 2% in 2021. However, Fed Chairman Jerome Powell noted that although this year’s increase would pierce the 2% goal, it would not provide enough time for the job market to recover. Therefore, the committee still expects to keep its policies through 2023 and use whatever resources it has to let inflation run hot—near 2%—until unemployment settles near its long-run level of 4%.

4. On Thursday, the European Medicine Agency asserted that it could not establish any links between the AstraZeneca COVID-19 vaccine and the blood clot cases based on the available evidence. The E.U. drug authority also added that the vaccine’s benefits outweighed the possible risks and gave the shot a greenlight. Nevertheless, Sweden, Norway, and Denmark have requested more time to decide on the vaccine, and Finland has determined to follow these countries’ lead and put the jab on hold after reporting two clotting cases. On Friday, the Deutsche Welle reported that a German team of researchers found the cause of the blood clotting. Although the article does explain what the trigger is, it does say that researchers have shared the information with hospitals across Europe and that treatments can only be administered to patients that develop blood clots. While France and Germany have resumed their vaccination campaigns with the AstraZeneca jab, Italy opted to announce it would give an alternative vaccine later on to the citizens that decline it. On a different note, the U.S. decided on Thursday to lend some of its AstraZeneca vaccine stock to its neighbors while the Food and Drugs Administration awaits the results of a U.S. clinical trial. Canada will borrow 1.5 million doses, and Mexico 2.5.

5. Tensions between Canada and China are on the rise as Michael Spavor and Michael Kovrig—known as the two Michaels—remain in Chinese confinement. Mr. Spavor, a consultant, and Mr. Kovrig, a former diplomat, were apprehended in 2018 after the Royal Canadian Mounted Police arrested Meng Wanzhou, Huawei’s Chief Financial Officer, on behalf of a U.S. request for extradition. On Friday, a Chinese court held a secret trial for Michael Spavor. Despite the fact that evidence of espionage against the Canadian prisoners remains unknown—except to the Chinese authorities—the tribunal proceeded with the hearing and barred the Canadian diplomats from entering. Mr. Spavor’s two-hour-long trial ended without sentencing, which can take years in the Chinese system, and without any information regarding the developments of the hearing. A statement released after the trial read that “Because the case involves state secrets, the Dandong Intermediate People’s Court of Liaoning Province, in accordance with the law, held a trial of Canadian defendant Michael Spavor in closed session.” Mr. Kovrig’s trial is scheduled for Monday, and it is expected to be conducted under similar conditions, in apparent defiance of the Vienna convention and a Canadian Chinese pact. Canada’s Prime Minister Justin Trudeau has accused China of manufacturing the espionage charges in retaliation for Meng’s arrest. The Canadian government has asked the U.S. to take measures leading to the two Michaels’ freedom as Canada detained Meng on a U.S. warrant. On Friday, U.S. State Department spokeswoman Jalina Porter reiterated American calls to release the two Michaels from “arbitrary and unacceptable” imprisonment.

6. U.S.-Russia relations hit a new low this week. On Tuesday of the Department of National Intelligence released a classified report on foreign interference in the 2020 Presidential elections. The report found evidence of Iran and Russian-led smear campaigns—Iran’s against former President Trump and Russia’s against President Joe Biden. On Wednesday, Biden sat on an interview with ABC’s George Stephanopoulos in which he said his Russian counterpart Vladimir Putin would pay the price for the denigration campaign. Stephanopoulos pressed on after Biden said he knew Putin relatively well and asked if he thought Putin was a killer, to which Biden replied: “Mmm-hmm, I do.” The answer was not without repercussions. Later that day, the Kremlin summoned its U.S. ambassador, Anatoly Antonov, back to Russia. On Thursday, Putin replied, “it takes on to know one.” He also added that: “We always attribute to other people […] what we essentially are.” Putin’s spokesperson said that Biden’s statement was “very bad” and that it was a sign that the U.S. did not want to normalize relations. Despite all the ruffled feathers on both sides, Biden did say during this televised interview that it was possible to “walk and chew gum at the same time for places where it’s in our mutual interest to work together,” and alluded to the arms agreement both countries decided to extend in January. On Thursday, Putin proposed further talks with Biden for Friday or Monday; the Russian head of state suggested both leaders could arrange an agenda to discuss different topics such as bilateral relations and the current health crisis.

7. Brent and West Texas Intermediate crude oil completed on Thursday a five-day losing streak that pushed both benchmarks close to the $60 mark. On Thursday, Brent and WTI oil plunged by a similar sum; Brent’s price declined by $4.49 and WTI’s by $4.42. However, Brent and WTI crude managed to reverse course on Friday and climbed about 2% each. Since November of last year, both benchmarks have risen by more than 60%; this is the biggest weekly fall since October. Analysts had been warning that this rally could not continue without a correction, and after last week’s Brent breaching of the $70-threshold, experts asserted again that a decrease was due soon. Analysts have attributed the reversal to the renewed lockdown measures in parts of Europe, signs of weak oil demand in the U.S. and China, and the slowdown in Europe’s vaccination campaign resulting from AstraZeneca’s jab clotting cases. Brent oil closed Friday’s session at $64.46 and WTI at $61.44.

8. The euro spent most of the week in negative territory against the U.S. dollar. The European currency fell sharply into negative turf after peaking in the wee hours of Monday. The same peak-drop-valley pattern was repeated on Tuesday. On Wednesday, the currency attempted several recoveries until it managed to ascend into positive territory in the late afternoon. The euro touched the week’s high in the early hours of Thursday and then plummeted in the morning and into the afternoon. The currency reached a valley once more before unsuccessfully attempting to leave the negative territory on Friday morning. The European currency dropped even lower on Friday’s session and touched the week’s low in the afternoon. Despite regaining ground, the euro closed the week in negative turf and to the downside against the greenback.

9. Abrupt drops and ascents—without the valleys—characterized the Japanese yen’s week against the U.S. dollar. The yen started its week with a sharp fall into negative territory, touching the week’s low on Monday’s early morning. The Japanese currency peaked but fell again until it ascended almost vertically out of negative turf by the afternoon. Despite a sharp descent, the yen managed to stay on positive territory, although not for long. In the wee hours of Wednesday, the currency resumed its downward path, culminating in the afternoon with a vertical ascent that took it back to positive turf. The yen peaked again in the late evening, then dived into the negative ground and quickly jumped back into positive territory. On Thursday morning, the yen fell below opening level again, and, after a series of peaks-drops, it re-entered positive turf and reached the week’s high on Friday morning. Despite losing ground again on Friday’s session, the Japanese currency remained above opening levels and closed the week to the upside against the U.S. dollar.

On Thursday and Friday, China and the U.S. met in Anchorage, Alaska, for the first high-level meeting between the two nations under the Biden administration. The encounter seemed to start on the wrong footing as high-ranking officials from both countries turned the opening greetings into an hour-long argument filled with accusations and criticisms of each state’s international policies. China’s top diplomat Yang Jiechi used the opening remarks to assert that the U.S. did not have any right to lecture China on democracy and human rights abuses when the U.S. faced serious challenges in those areas. The U.S. first accused China of violating the format of the talks. Then, Secretary of State Anthony Blinken responded that the United States had a long history of openly confronting its shortcomings rather than sweeping them “under the rug.” Blinken finished his intervention by reminding the Chinese delegation of an exchange that happened a decade ago between Joe Biden and Xi Jinping, in which the American told his Chinese counterpart: “It’s never a good bet to bet against America,” and added, “That remains true today.” Although a U.S. official said the altercation was a “grandstanding” for a Chinese audience, the sparring did not surprise experts.

On the contrary, scholars and analysts expected this meeting would provide a space to utter frustrations and get a sense of each other’s agendas, rather than produce agreements on sensitive topics. The Anchorage meeting ended on Friday with clear signs of deep disagreements, but also with remarks to each country’s media outlets acknowledging that both nations shared interests like climate change, Afghanistan, Iran, and North Korea. Chinese-U.S. tensions reached the United Nations on Friday, during a General Assembly meeting marking the International Day for the Elimination of Racial Discrimination. U.S. ambassador Linda Thomas-Greenfield said in her speech that racism is deadly for millions of people worldwide and used the Uyghur extermination as an example. Chinese ambassador to the U.N. Dai Bing rebuked Thomas-Greenfield’s comment by saying that China’s human-rights violations did not give the U.S. “the license to get on a high horse and tell other countries what to do.”

As businesses reopen and the demand for goods and services regains momentum, many investors continue purchasing physical precious metals to shield their portfolios from inflation. Savvy investors continue to see the ownership of physical precious metals as a means to diversifying their portfolios, and thus, as a shield from the uncertainty of bubbly equity markets and potential price increases. Despite the hedge attributes of precious metals, they 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.
Precious Metals International, Ltd.

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