The Precious Metals Week in Review – April 16th, 2021

1. Relative calm marked this week’s economic and geopolitical scene. In the economic realm, China and the U.S. delivered encouraging news that signals the economic recovery of the world’s two largest economies is underway. The backlash against cryptocurrencies continued today as the Turkish Central Bank decided to ban all transactions in this medium of exchange. In the political arena, the U.S. issued a set of sanctions against Russia. The White House also sent an unofficial delegation to Taiwan to strengthen bonds with the island and counter Chinese efforts to undermine its democratic regime.

On the vaccine-career front, the Center for Disease Control and Prevention (CDC) and the Food and Drugs Administration (FDA) recommended a pause in the use of Johnson & Johnson’s COVID-19 vaccine after reports of rare clotting emerged. On Friday, an ongoing study by researchers at the University of Oxford reported that the risk of brain clotting (cerebral venous thrombosis, or CVT) after suffering from COVID-19 is 30% higher among patients under 30 when compared with other age groups. Although news reports have only linked the AstraZeneca and Johnson and Johnson vaccines to clots, the Oxford study also included evidence related to the Moderna and Pfizer jabs. A news article summarizing the research’s main findings said that “In over 480,000 people receiving a COVID-19 mRNA vaccine (Pfizer or Moderna), CVT occurred in 4 in a million [cases]. CVT has been reported to occur in about 5 in a million people after [the] first dose of the AZ-Oxford COVID-19 vaccine.” A Wall Street Journal article disclosed on Friday that J&J had asked its competitors to join efforts and study the risks of vaccine-related blood clots and build an informal alliance to communicate the shots’ risks and benefits to the public; AstraZeneca agreed, but Moderna and Pfizer declined.

2. For the week ending on April 10, the seasonally adjusted number of Americans filing for unemployment decreased vis-à-vis the previous week’s revised level. The estimated number of initial claims totaled 576,000, a decline of 193,000 from 769,000. The revised figure for the week ending on April 3 increased by 25,000 claims, from 744,000 to 769,000. Meanwhile, the four-week moving average for the week ending April 10 declined by 47,250 to 683,000 from the preceding week’s revised average. The revised figure for the week ending April 3 swelled by 6,500 to 730,250 claims. The number of Americans who cannot claim unemployment benefits and who applied for Pandemic Unemployment Assistance decreased for the fourth consecutive week. This unadjusted figure fell by 20,444 applications, from 152,419 in the week ending April 3 to 131,975 by April 10. This week’s unemployment report came with the lowest four-week average and initial claims level since March 14, 2020.

3. On Wednesday, Federal Reserve Chair Jerome Powell finally gave clues about its pandemic economic policies and said the central bank will start tapering its bond purchases well before raising interest rates. Beginning June of last year, the Fed decided to purchase $120 billion of mortgage-backed securities and Treasury debt every month to counter the pandemic-triggered economic crisis. Since December, the central bank has said it would reduce those purchases once the economy had made “substantial further progress” toward its employment and 2% inflation targets. In a virtual event presided by Washington D.C.’s Economic Club, Powell said, “We will taper asset purchases when we’ve made substantial further progress toward our goals, from last December when we announced that guidance. […] That would in all likelihood be before—well before—the time we consider raising interest rates.” Chairman Powell also restated he deems highly unlikely that the Federal Reserve will raise its rates this year and added that he thinks, as well as most officials, interest rates will remain near zero through 2023. Many analysts have raised alarms about inflation, particularly after the Labor Statistics Bureau released its latest Consumer Price Index report on Tuesday, documenting the largest one-month increase since August 2012. Chairman Powell acknowledged the concerns during the meeting. Still, he stood by his previous comments on the matter by saying that inflation will run above 2% for some time and eventually wane—a sentiment the current administration shares.

4. Retail sales boomed in March as Americans spent their latest stimulus check of $1,400. On Thursday, the Department of Commerce reported a 9.8% increase in retail sales, which surpassed economists’ expectations by 3.7% and contrasted with February’s decrease of 2.1%. Even though increasing amounts of relief checks are going to savings accounts instead of spending, March’s report signals that consumers are willing to spend. Sporting goods consumption grew the most by 23.5%, followed by an 18.3% increase in clothing and accessories, 15.1% in car dealers and motor vehicle parts, and a 13.4% surge in the bar and restaurant industry. Although analysts expect a drop in spending in April, “with the vaccination rollout proceeding at a rapid pace and households finances in strong shape, we expect overall consumption growth to continue rebounding rapidly in the second quarter too,” said U.S. economist at Capital Economics Michael Pearce. An increasing inflation rate could also challenge consumer behavior in the coming months; in March, the consumer price rose 2.6% compared to a year ago, primarily due to increasing gas prices.

5. Turkish attempts to keep the Turkish lira from further depreciation continued this week as the Turkish Central Bank banned on Friday the use of cryptocurrencies as a form of payment. Turkish citizens have increasingly resorted to cryptocurrencies to protect their wealth from inflation—now at 16%—and lira depreciation. The measure comes after several attempts in previous weeks to control the purchase of other hedges, such as gold, which widen the country’s account deficit and put additional pressure on the currency. The central bank argued its determination stemmed from the excessive volatility of cryptocurrencies and its suitability for illegal activities because they are “neither subject to any regulation and supervision mechanisms, nor a central regulatory authority.” Turkey’s decision follows China’s footsteps, which banned cryptocurrency trading in 2017, and predates India’s legislation on the matter, which is expected to be one of the strictest worldwide.

6. On Tuesday, the CDC and the FDA issued a joint statement recommending a pause in the use of Johnson & Johnson’s COVID-19 vaccine after reports of rare clotting emerged. The two agencies said they are investigating six cases of unusual clots, all in women, that developed six to 13 days after inoculation. The thrombi resemble those reported with the AstraZeneca vaccine, as they also occur in veins that drain blood from the brain. This setback could delay the vaccination schedule; New York, New Jersey, and Connecticut have put on hold the use of the jab until both agencies deem otherwise. On the same day, Moderna released data from its phase three clinical trial regarding their vaccine’s effectiveness after six months of the second dose. The pharmaceutical said their shot was more than 90% effective against COVID-19 and more than 95% effective against severe disease. Although the company admitted the results were preliminary, it said it will share updated data on antibodies and the vaccine’s efficacy against asymptomatic cases. Moderna is currently evaluating its jab on adolescents ages 12 – 17 and is now enrolling pediatric participants ages six months – 12 years old.

7. Canadian asset managers prepare to launch the first Exchange-Traded Fund (ETF) of Ether, the second-most traded cryptocurrency behind Bitcoin, developed in Canada. CI Global Asset Management, Evolve Funds, and Purpose Investments Inc., received authorization from the Ontario Securities Commission to launch Ether ETFs, thus allowing direct investment in cryptocurrencies and bypassing digital wallets, which generally create additional fees. A fourth company, 3iQ Corp., could join these asset managers in the near future; the firm currently awaits approval of its preliminary prospectus. Although these companies will be the first to launch the Ether ETFs, they are not new to cryptocurrency ETFs. Evolve Funds and Purpose Investments Inc. launched Bitcoin ETFs earlier this year. All three investment companies have announced April 20 as the first day of Ether ETF trading.

8. Brent and West Texas crude oils had a week of constant daily ascents, except for Friday when both benchmarks fell. WTI leaped over the $60 threshold on Tuesday and Brent over the $65 mark on Wednesday. News of economic recovery in China and the U.S. improved economists’ outlooks for the following months and led both crudes to the week’s high on Friday. In the U.S., retail sales rose, while weekly unemployment claims dropped; in China, official data reported on Friday that the gross domestic product for the first quarter had swelled 18.3% year-over-year. Brent and WTI crudes seemed poised to close the week to the upside in the morning; however, both lost ground in the latter part of the session and closed the week to the downside. Despite Friday’s losses, Brent crude settled at $66.72 and WTI oil at $63.07.

9. The euro and the Japanese yen climbed up most of the week against the U.S. dollar. The euro opened the trading week with a dip into negative territory that led to the week’s low on Monday morning. Next, the European currency engaged in the first vertical ascent of the week, leaving negative territory and foretelling the currency’s journey for the remainder of the week. Although the euro slid into negative turf a second time on the wee hours of Tuesday, it climbed vertically in the afternoon—way above opening levels—and maintained the momentum for the rest of the week. Although the currency slowly fell throughout Thursday’s session, it inverted course on Friday morning, touched the week’s high in the afternoon, and closed the week to the upside against the greenback. The Japanese yen engaged in the first ascent of the week against the U.S. dollar faster than the euro. Although the Japanese currency also dropped following the first ascent, it only touched negative territory once on Tuesday morning. After reversing course with an almost vertical hike, the currency initiated a long and sustained climb that took it to the week’s high by Thursday evening. In the early hours of Friday, the yen dropped but managed to recover some ground during the session’s remainder. Despite scaling throughout the week, the yen closed Friday’s session to the downside against the greenback.

U.S. – Russian relations seem to be reaching a new stalemate as U.S. President Joe Biden took retaliatory measures against Moscow on Thursday for its intervention in the past presidential elections and the Solar Winds hacking, among other things. For election interference efforts, the Biden administration sanctioned 16 people and 16 entities; for the Solar Winds cyber-attack, the Treasury Department precluded American companies from doing business with six Russian firms. Biden also expelled tend diplomats and admonished Russian citizens and entities for Russia’s annexation of the Crimean Peninsula, thus joining Australia, Canada, the European Union, and the U.K. in their sanctions. In retaliation, Moscow said on Friday it would also expel ten high-ranking U.S. diplomats. On Thursday, the European Union renewed its unswerving support for Ukraine as Russia increases military contingents on its eastern border.

U.S. tensions with China also increased this week as the U.S. sent an unofficial delegation to the Chinese-claimed island of Taiwan early this week to commemorate the 42nd anniversary of the Taiwan Relations Act. Three senior statesmen constituted the delegation; former Deputy Secretaries of State James Steinberg and Richard Armitage joined former U.S. Senator Chris Dodd to meet with senior Taiwanese officials on Thursday. The visit comes a week after the Senate’s foreign relations committee introduced the “Strategic Competition Act of 2021,” which highlights the island’s geopolitical importance in countering China. Although unofficial, the delegation signals Biden’s friendship and commitment to Taiwanese democracy as all three members have personal connections with President Biden and have long been advocates of the island. The mission also deepens the bonds that former Secretary of State Mike Pompeo sought to strengthen as China escalated its military presence in the region. The unofficial character of the visit complies with the “One-China policy,” under which China considers Taiwan part of its territory and a domestic affair, and thus precludes any state from holding official relations with the island.

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.

Trading Department — Precious Metals International, Ltd.

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