The Precious Metals Week in Review – March 26th, 2021

1. Tense diplomacy continued this week as the European Union and the U.K. joined the United States and Canada in the rollout of new sanctions against China; Western firms are bearing the brunt of Chinese retaliation. The next day, a jam in the Suez Canal sent shockwaves through world markets as it put more pressure on rising shipping prices and added strain on already disrupted supply chains. However, container shortages, port congestion, and capacity constraints due to the coronavirus pandemic are not the only factors behind heightened prices; in Canada, real estate practices have driven house prices up to 30% in the past six months. Even though COVID-19 infections continue to increase worldwide, good news made the headlines on the vaccination and disease-treatment fronts.

2. For the week ending on March 20, the seasonally adjusted number of Americans filing for unemployment plunged vis-à-vis the previous week’s revised level, reaching its lowest in over a year. The estimated number of initial claims totaled 684,000, a decrease of 97,000 from 781,000. The revised figure for the week ending on March 13 grew by 11,000 claims, from 770,000 to 781,000. Meanwhile, the four-week moving average for the week ending March 20 was 736,000, a drop of 13,000 claims from the preceding week’s revised average. This figure’s revision for the week ending March 13 rose by 2,750, totaling 749,000 claims. The number of Americans who cannot claim unemployment benefits and who applied for Pandemic Unemployment Assistance decreased for the second consecutive week closing on March 13. This unadjusted figure fell by 42,509 applications, from 284,254 in the week ending March 20 to 241,745 by March 13.

3. President Joe Biden upped his promise of 100 million vaccines in the first 100 days of his presidency to 200 million during his first press conference on Thursday. Last Friday, the United States reached Biden’s previous goal of 100 million vaccines, and the country is currently issuing 2.49 million doses every day. On Monday, AstraZeneca announced the results of a large trial in the U.S., Chile, and Peru and concluded its vaccine was 79% effective against symptomatic COVID-19 and 100% effective against severe disease and hospitalization. These results would have paved the way for the Food and Drug Administration’s (FDA) approval; however, the Data and Safety Monitoring Board (DSMB) of the National Institute of Allergy and Infectious Diseases (NIAID) said late Monday that AstraZeneca had included outdated information in its press release. The next day, in response to a harsh note from the DSMB, the pharmaceutical said the results in the newsflash were based on a previous analysis of data collected before February 17 and that those results were consistent with the final results, thus its decision to include them. Nevertheless, the NIAID statement implies that the data obtained after February 17 changed the vaccine’s efficacy rate. AstraZeneca said in response that it would “intend to issue results of the primary analysis within 48 hours.”

4. This week, GlaxoSmithKline made the headlines with its emergency-use request to the Food and Drug Administration (FDA) for their monoclonal antibody drug. The pharmaceutical’s clearance petition is for use on people aged 12 and up. According to an interim analysis of a phase three trial performed on 583 patients, the drug cut down hospitalizations or death from COVID-19 by 85%. Because of the high level of efficacy, the Data Monitoring Committee recommended stopping the trial. The company expects that conversations with the European Medicines Agency (EMA) and other regulating entities will soon lead to making the drug available to patients. On a slightly different front, EMA gave clearance on Friday to two production facilities that would manufacture COVID-19 vaccines. Dutch-run Halix is an AstraZeneca subcontractor and would produce this jab, while the newly constructed facility in Marburg, Germany, would churn out Pfizer-BioNTech’s vaccine. The European watchdog thinks the first deliveries could happen as soon as next week, and it expects these authorizations will help boost the slow pace of immunizations for the second quarter of the year. In this regard, the United States maintains the lead with 30% of its population inoculated, and today the White House announced its plans to further its vaccination plans. Boston (Massachusetts), Norfolk (Virginia), and Newark (New Jersey) will become mass vaccination centers run by the federal government with a joint inoculation capacity of 15,000 people daily. Johnson & Johnson’s delivery of circa 11 million doses for next week should keep the country on track to achieving 200 million inoculated Americans by the end of next month.

5. China’s tensions with its detractors continue to grow. On Thursday, Chinese state TV called for a boycott of the Swedish clothing brand, H&M, after a year-old social media statement resurfaced in which the brand said it would stop buying cotton from Xinjiang, Northwest China. The boycott call came after the Communist party’s Youth League revisited H&M’s old post on Wednesday. Without explaining why it had decided to single out the Swedish company, the Youth League said: “Spreading lies to boycott Xinjiang while wanting to make money in China? Wishful thinking.” On Thursday, several Chinese celebrities ended sponsorships with the brand as well as Nike, Burberry, Lacoste, Uniqlo, and Adidas. Despite H&M Group’s efforts to explain its commitment to “comply with the principles of sustainable development,” its respect for Chinese consumers, and stating that its decision “doesn’t represent any political standpoint,” the shun went on; by the following day, H&M had been erased from the net. On Friday, Hennes & Mauritz’s products were deleted from key e-commerce platforms, like JD.com and Alibaba. Similarly, H&M’s app had disappeared from the app stores, and its store locations had been expunged from the ride-sharing company Didi Chuxing. This is not the first time the Chinese government tries to shut its doors to foreign companies. Last Friday, the Chinese military banned Tesla vehicles from entering its premises because of concerns over cameras installed in cars. Tesla CEO Elon Musk responded with a comparison to TikTok, recalling the war against Chinese apps that began under former president Trump: “The United States wanted to shut down TikTok. Luckily, it did not happen,” said Musk. “Many people were concerned about TikTok. But I think this kind of concern is unnecessary, and we should learn lessons from it.”

6. The Chinese ban on H&M seems to be a reaction to the European Union’s and U.K.’s decision to join Monday the United States and Canada in sanctioning Chinese officials involved in the confinement of Muslim Uyghurs in so-called re-education camps, in the Xinjiang province. As reported by The Guardian, this is the first time in more than 30 years that the U.K. and the E.U. penalize China for human rights violations, and both are aware of the economic consequences this move could entail. Beijing responded with a statement, urging “The E.U. […] to reflect on itself, face squarely the severity of its mistake, and redress it. It must stop lecturing others on human rights and interfering in their internal affairs. It must end the hypocritical practice of double standards.” Additionally, the Chinese government blacklisted 10 E.U. members of the European Parliament and diplomats, and four thinktanks; on Friday, Beijing broadened the list to include nine British Conservative lawmakers and four organizations. The E.U. awaits parliamentary ratification of a crucial investment agreement with China seeking to grant market access to European businesses, leveling the playing field, and establishing a basic framework against forced labor. Unfortunately, this is not the only sticking point between Europe and China. Although neither the E.U. nor the U.K. has sanctioned Chinese officials for preventing democratic elections from happening in Hong Kong, the U.K. did issue a statement declaring Beijing’s infringement of the Sino-British joint declaration. In contrast, the U.S. has taken measures in this regard and punished 24 officials who played a role in enacting and implementing the sovereignty laws.

7. As reported in The Globe and Mail, the surge in real estate property demand and the supply shortage is driving Canadians to engage in a real estate practice that is sending house prices through the roof. In the city of Toronto, blind bidding is pushing the price of houses up by $100,000 to $700,000 over the asking price. The trend is the same in the Greater Toronto Area and surrounding municipalities. In Burlington, Mississauga, Kitchener-Waterloo, and Barrie, prices have increased by $100,000 in the past three months; Milton and Oakville have seen a steeper rise—almost $200,000 since November of last year. In the words of Barrie Mayor, Jeff Lehman, this practice is feeding a market failure in which price distortion due to incomplete information is making people pay prices that do not reflect “the true value of the house because they are into a bidding war.” Although blind bidding protects people’s privacy and keeps bidders from engaging in bidding competitions, some realtors agree that the practice is leading to an uncontrolled increase in prices and think that the process should be more transparent. Economists seem to agree, particularly in the absence of the usual price controls—stricter mortgage rules and higher interest rates—as the housing market begins to show signs of “irrational exuberance.” Despite a provincial-government effort launched in 2019 to increase transparency and consumer protection in real estate practices, the blind bidding process remains untouched, and millennials are battling to buy unaffordable housing.

8. Both oil benchmarks were in for a roller coaster this week, alternating days of ascent and descent, but closing the week to the upside: Brent crude oil settled at $64.37 and West Texas Intermediate at $60.72. While Brent crude managed to remain over the $60-mark throughout the week, WTI went below the $60-threshold on Tuesday and Wednesday. On Friday, prices jumped over 4% as the latest effort to end the Suez Canal jam failed, and experts now fear that it might take weeks. On Tuesday, one of the world’s largest container ships, the Ever Given, ran aground the waterway due to strong winds. Both the U.S. and Turkey have offered to help; the U.S. Navy currently awaits authorization from local authorities to send a team of dredging experts to the zone. The blockage has caused worldwide panic as this disruption adds to coronavirus-linked delays in delivering retail goods to consumers. According to German insurer Allianz, 13% of world commerce passes through the Suez Canal, and its obstruction could cost global trade $6 billion to $10 billion.

9. The euro spent another week in negative territory against the U.S. dollar. The European currency dropped vertically right after opening and managed to reverse course in the morning of Monday. The currency momentarily left negative territory and touched the week’s high by the afternoon but initiated a decline an hour later, returning into negative turf and accelerating the drop’s pace in the early hours of Tuesday. The euro managed to slow down the descent on Wednesday but accelerated again on Thursday afternoon with another almost-vertical fall that drove the currency to the week’s low. From there on, the European currency initiated a bumpy ascent that led it to close the week to the upside against the greenback. The Japanese yen had a less turbulent week against the U.S. dollar. It started with a vertical ascent right at the beginning of this week’s trading, followed by a fall bordering opening levels. The currency managed to recover some ground and reached the week’s high on Tuesday morning. Despite attempting to remain above opening levels, the Japanese currency briefly touched negative turf on Wednesday at noon, recovered, and plunged again by the evening. For the remainder of the week, the yen engaged in a descent that accelerated on Friday morning and drove the currency to the week’s low. The yen managed to regain some ground in the remainder of Friday’s session but closed the week to the downside against the greenback.

The vaccine race continued this week amid decisions to continue increase restriction levels. Germany is urging its citizens to stay at home during Easter and declared continental France and its overseas territories as coronavirus “high incidence area.” France now records the fourth-highest number of coronavirus infections worldwide and one of the highest death tolls. Scientists and doctors have been pressing the French government to adopt more stringent measures because of the risks that the new variants pose. In the meantime, Portugal has extended its work-at-home order until the end of the year and has said that people must work from home as long as possible, even if the lockdown orders are lifted. The government has also asked companies to stagger working hours to avoid large gatherings of people. In Mexico, COVID-19 deaths surpassed the 200,000-victim threshold; however, experts think the death toll is closer to 300,000 as the Aztec country’s testing rate remains extremely low.

As the vaccine rollout gains momentum and the return to a somewhat normal life becomes more imminent, 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.

Friday to Friday Close (New York Closing Prices)

Previous year Comparisons

Here are your Short Term Support and Resistance Levels for the upcoming week.

This is not a solicitation to purchase or sell.
© 2021, Precious Metals International, Ltd.