The Precious Metals Week in Review – April 9th, 2021

1. This week, COVID-19 cases continued to increase worldwide, and reports of new a new variant emerged in the U.S. The vaccination campaign in Europe remains at a crossroads as countries decide whether to continue using the AstraZeneca vaccine under new guidelines or stop its use altogether. In the United States, Johnson & Johnson dramatically reduced the number of delivered vaccine doses this week and will decrease it again in the coming week. On Wednesday, the Federal Open Market Committee released the minutes from its March meeting. The summary states that despite substantial economic gains, it will take much more progress before the Committee decides to change its policies. On Friday, Bank of America said that more money has been invested in stocks in the past five months than in the last 12 years combined. Although many may think this is a case of irrational exuberance, chief market strategist at National Securities Art Hogan considers it is the result of an outburst in economic activity: “It’s less about irrational exuberance in the overall market, less about the 1999-2000 levels, and more about what’s the driver. The driver is clearly an explosion in economic activity that likely will have some earnings growth in its wake.”

2. For the week ending on April 3, the seasonally adjusted number of Americans filing for unemployment increased vis-à-vis the previous week’s revised level. The estimated number of initial claims totaled 744,000, an increase of 16,000 from 728,000. The revised figure for the week ending on March 27 increased by 9,000 claims, from 719,000 to 728,000. Meanwhile, the four-week moving average for the week ending April 3 grew by 2,500 to 723,750 from the preceding week’s revised average. The revised figure for the week ending March 27 swelled by 2,250 to 721,250 claims. The number of Americans who cannot claim unemployment benefits and who applied for Pandemic Unemployment Assistance decreased for the third consecutive week. This unadjusted figure fell by 85,313 applications, from 237,065 in the week ending March 27 to 151,752 by April 3.

3. On Thursday, the U.S. Senate foreign relations committee introduced a 280-page bill titled “Strategic competition Act of 2021,” aiming at countering China in the areas of democracy, human rights, and economic competition. The bipartisan bill stresses the importance of military investments in the Indo-Pacific region and contemplates allocating $655 million in Foreign Military Financing in funding for this purpose, plus an additional $450 million for the Indo-Pacific Maritime Security Initiative for the fiscal year 2022 through 2026. The law project singles out Taiwan—China’s breakaway province, in Beijing’s book—as “a vital part of the United States Indo-Pacific strategy” and puts no restrictions on interactions between U.S. officials and its Taiwanese counterparts. This is not the only measure the Senate expects to fast track in this area. The Senate’s Commerce Committee has also developed a bill called the “Endless Frontier Act,” which attempts to bolster the semiconductor industry in the U.S.; both committees are expected to convene on April 14 to discuss amendments and vote.

4. Researchers at Stanford University have identified a “double mutant” COVID-19 strain first detected in the San Francisco Bay Area. This particular strain originated in India and contains two mutations that had previously been found in separate variants but not together. There is concern among the scientific community as doctors now have a fair amount of information regarding individual viruses’ behavior; however, there is none on the combined mutation. It is still unknown whether the new variant is more contagious; nevertheless, because of the characteristics of the individual strains, doctors think the combination reduces antibody neutralization and increases transmissibility. For this reason, health experts worry that this double mutation will slightly reduce vaccine effectiveness; however, they expect that inoculations will continue preventing hospitalizations and death. On the vaccination front, Pfizer and BioNTech requested authorization for emergency use in the U.S. of their vaccine on adolescents between ages 12 to 15 on Friday; this vaccine is the only one with approval for use in people 16+ years.

5. On Wednesday, the European Medicine Agency (EMA) said it had found a possible link between the AstraZeneca vaccine and the rare clot formation cases. As of April 4, of the 34 million people that had received the vaccine in the European Union and Britain, EMA had received 222 reports of blood clots in the brain or abdominal vessels, that is, less than 0.001% of the inoculated population. On Thursday, British regulators recommended that people below 30 years of age get an alternative vaccine to AstraZeneca’s. On the same day, Australia and the Philippines decided to curb the jab’s use, and the African Union abandoned plans to buy it. Meanwhile, Germany has resolved to approach Moscow to obtain the Russian shot “SputnikV,” which will only be used if EMA gives the green light. In the United States, Johnson & Johnson released 1.5 million doses this week, and next week’s delivery is expected to fall to 700,000—a considerable drop when compared to the 11 million shipped the week before. The reduction in shipment comes after staff at an Emergent BioSolutions facility in Baltimore conflated ingredients for the AstraZeneca and J&J shots; as Reuters reported last week, the facility has not received authorization from the Food and Drugs Administration to produce the jab. In the meantime, Canadian Biolyse Pharma, a small laboratory previously rebuffed by COVID-19 vaccine producers for its reduced production capacity, currently awaits authorization from the Canadian government to produce inoculations for poorer countries.

6. Friday’s release of the Canadian Labour Force Survey greatly surpassed expectations as job gains netted 303,000, putting the northern economy on track to regaining the jobs lost to the pandemic. The unemployment rate fell by 0.7% to 7.5%, reaching its lowest level since February 2020. The easing of restrictions contributed to the rise in employment, particularly in the high-touch sectors of the economy. Retail added 95,000 jobs; information, culture and recreation, 62,000; while accommodation and services put in 21,000. The health care and social assistance sector added 47,000 new posts, educational services put in 35,000 more, and the producing-goods industry added 43,000. Nevertheless, economists fear the increase will be short-lived as provinces impose a new series of restrictions to curb the recent climb in COVID-19 cases. On Wednesday, Ontario Premier Doug Ford reimposed a stay-at-home order to fight the current wave of infections, which have congested Intensive Care Units. Ford also announced plans to deploy mobile vaccination contingents to inoculate high-risk workers, including teachers. The Ontario Education Minister closed schools for two weeks in Peel and Toronto as a precautionary measure.

7. The Canadian Labour Force Survey came on the heels of the U.S. Nonfarm Payroll Report issued last week. New jobs skyrocketed in March, vastly outpacing economists’ expectations of 675,000 with a net gain of 916,000 job posts. Experts see this recoup as a sign of the economy’s recovery; however, they fear that the current surge in infections may lead to a new round of closures. The fast pace of the vaccination campaign and the easing of restrictions in much of the country have contributed to March’s job recoup—the second-highest since the 1.58 million jobs regained in August 2020. Like in Canada, the high-touch sectors of the economy contributed with the most significant increases: leisure and hospitality netted the largest gain with 280,000 new hires, followed by bars and restaurants (176,000), local state and private education (190,000), and arts, entertainment and recreation (64,000). Construction netted a robust gain of 110,000, professional and business services added 66,000, while manufacturing created 53,000 new jobs. In addition to March’s substantial gains, revisions to January’s and February’s data enlarged the number of hires for those months by 67,000 and 89,000, respectively.

8. Brent and West Texas Intermediate crude oils moved in the same direction throughout the week except for Wednesday when Brent crude prices decreased, while WTI’s climbed. Both oil benchmarks experienced significant losses on Monday, placing WTI below the $60 mark. Brent and WTI oils recouped some of the losses on Tuesday and Thursday; however, neither returned to opening levels. On Friday, Brent crude and WTI crudes lost value and closed the week to the downside; Brent oil settled at $63.05 and WTI at $59.34. Increasing COVID-19 cases and worldwide lockdowns slowed down the price ascent of the European and American crude oil benchmarks. Progress on the U.S.-Iran nuclear deal put extra pressure on prices as a successful treaty would increase world oil supply.

9. This week, the euro and Japanese yen traded higher against the U.S. dollar. The euro began the week with a short visit to negative territory in the wee hours of Monday that led the currency to the week’s low by the late morning. The euro inverted course, reached positive territory by the afternoon and plateaued for the remainder of the session until the late morning of Tuesday when it undertook the second ascent of the week. The European currency repeated the previous day’s climb-plateau pattern until Wednesday and broke it once the euro peaked and fell. On Thursday, the currency initiated an ascent that took it to the week’s high in the afternoon; the euro seemed to attempt a repeat of the ascent-plateau pattern, but it fell from the wee hours of Friday until noon. After one last effort to climb, the euro dipped again and closed the week to the downside against the greenback. The Japanese yen had a similar week to the euro. After a slight dip that took the Japanese currency to the week’s low, the yen climbed vertically until Monday afternoon and then fell through the morning of the next day’s session. Next, the currency pursued a second vertical climb; this time, however, it was followed by a plateau that lasted all Wednesday’s session. After the relative stillness of the previous day, the yen undertook an ascent, reaching the week’s high by Thursday afternoon. The Japanese currency dipped after peaking, plateaued again, and fell through most of Friday. Although the yen tried to recover in the latter part of the session, it closed the week to the downside against the greenback.

On Thursday, Federal Reserve Chair Jerome Powell convened with IMF Managing Director Kristalina Georgieva, Director-General of the World Trade Organization Ngozi Okonjo-Iweala, and Ireland Finance Minister Paschal Donohoe for a virtual debate on the global economy. Powell seized the opportunity to talk about the robust recovery unfolding in the U.S. as a result of the quickening the vaccination campaign has gone under the Biden administration. However, Powell highlighted the uneven nature of the recovery and said that many unemployed Americans will struggle more than others to find jobs since the pandemic has shrunk some industries. “It’s important to remember that we’re not going back to the same economy. This will be a different economy,” said Powell. Ngozi Okonjo-Iweala also touched on the topic of the COVID-19 vaccine and highlighted that the unequal distribution of vaccines poses a threat to world economic recovery. She explained that only 0.1% of inoculations have gone to the developing world and, if this trend were to continue, world herd immunity could be significantly delayed, which could, in turn, result in vaccine-resistant variants that would reverse world economic growth. On Tuesday, the IMF revised up its global economic growth forecast from 5.5% in January to 6%. Kristalina Georgieva discussed the role of government support and said that last year’s recession would have been three times worse without government intervention.

Although Brexit concluded before the December 31, 2020 deadline, its consequences linger and have led to violent protests in Northern Ireland. Under the new rules, Ireland remained a member of the European Union, while Northern Ireland continues to be part of the U.K. In order to keep Ireland and Northern Ireland free from hard borders and abide by the 1998 Good Friday Agreement that put an end to the armed conflict, control posts for British goods were settled on Northern Ireland’s coast. However, the flow of goods through Belfast’s port is far from smooth; delays have resulted in empty store shelves, and suppliers in Britain have decided to avoid the hassle of sending goods to the island altogether. As a result, about 100 online retailers have forgone customers in Northern Ireland. In March, a group called the Loyalist Communities that represents paramilitary groups came out against the Good Friday Agreement, saying that it pushed Northern Ireland closer to Ireland than to the U.K. Violent protests broke out last week, and confrontations with the police have left 55 police officers injured; on Thursday, protesters threw rocks and petrol bombs at the police, and a group set a bus on fire. Loyalist groups resumed their attacks on Friday and plan to continue during the weekend.

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.

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