The Precious Metals Week in Review – April 23rd, 2021

1. Multilateralism and threats marked this week’s geopolitical scene. On Wednesday, Russian President Vladimir Putin said that Moscow would respond harshly and swiftly to any foreign threat and argued that other countries were mistreating Russia. Putin was alluding to the international backlash it received over the presence of 100,000 troops on the Ukrainian border and the (domestic and) international pressure over Vladimir Navalny’s health. On Thursday, Moscow announced the withdrawal of military contingents in an attempt to de-escalate tensions with Kyiv and the international community. On Thursday and Friday, the United States made a triumphant return to multilateralism with the Climate Summit, in which major global economic players committed to reducing carbon emissions. The global economy gave this week new signs of recovery in Europe, Japan, and Australia, and airlines in the U.S. reported improvements in their finances during the first quarter. On the vaccine front, the Center for Disease Control and Prevention decided to resume the use of Johnson & Johnson’s COVID-19 shot after experts concluded that the benefits of the immunization outweigh the risks.

2. For the week ending on April 17, 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 547,000, a decline of 39,000 from 586,000. The revised figure for the week ending on April 10 increased by 10,000 claims, from 576,000 to 586,000. Meanwhile, the four-week moving average for the week ending April 17 declined by 27,750 to 651,000 from the preceding week’s revised average. The revised figure for the week ending April 10 diminished by 4,250 to 678,750 claims. The number of Americans who cannot claim unemployment benefits and who applied for Pandemic Unemployment Assistance grew this week, ending a four-week streak of declines. This unadjusted figure increased by 1,598 applications, from 131,721 in the week ending April 10 to 133,319 by April 17. This week’s unemployment report came with the lowest four-week average and initial claims level since March 14, 2020, outdoing last week’s data.

3. Airlines seem poised to rebound this summer season. On Thursday, Southwest Airlines reported its first profits since the beginning of the pandemic, and American Airlines reported a smaller loss than in previous quarters. The inflection point happened in February and March when travelers started to book flights for spring break and summer vacations. Airlines are calling flight attendants and pilots back to work as they prepare for what could be a busy summer. Despite the pickup in activities, airlines remain cautious this time as they dealt with similar expectations last year, each time the virus seemed to subside. However, this time around, vaccination progress appears to support the takeoff fully. The progress made in the U.S. with the vaccination program has given the sector a boost. Yesterday, the country reached its 200 million-doses mark in Biden’s 92nd day in office, surpassing his goal of 200 shots in the first 100 days of his presidency. In Canada, the vaccination campaign seems to be picking up pace. On Sunday, Prime Minister Justin Trudeau announced on Twitter an agreement with Pfizer for eight more million doses of their COVID-19 vaccine. The vaccine is currently being offered to all inhabitants of Toronto’s hotbed neighborhoods, and people over 40 years old are now eligible for the jab in Ontario and three other provinces. On Tuesday, Québec expanded the use of AstraZeneca’s vaccine to people 45 and older.

4. On Wednesday, Canadian and U.S. authorities agreed to maintain the border closed to leisure travelers until at least May 21. Border officials of both countries currently discuss and plan possible changes to the measures in place for vaccinated travelers during the summer. However, President of the North Country Chamber of Commerce, Garry Douglas, said that “It seems increasingly likely we will not see major changes for summer[.] […] [However] we are still calling for some possible modest adjustments to accommodate near border property and boat owners, some additional allowance for business-related travel, and more support for family connections, limited for now to the vaccinated if they wish.”

The base for Douglas’s skepticism is the slow deployment of the inoculation campaign in Canada. Although some provinces have now started to inoculate 40-year adults and older, only 2.52% of Canadians have been fully vaccinated compared to 23.68% in the U.S., according to the Johns Hopkins Coronavirus Resource Center. On a slightly different front, Ottawa suspended all commercial and private passenger flights arriving in Canada from India and Pakistan. The measure responds to the news about India’s alarming second-COVID wave. On Wednesday alone, India recorded 315,000 new infections—a massive undercount of what is thus far the highest one-day infection count recorded worldwide.

5. The global economy is showing signs of economic growth as a consequence of the progress vaccination programs have made. Experts expect a strong rebound this year as immunizations reach more arms and more sectors of the economy fully reopen. Figures from the United States and China from the first quarter already hinted at the positive outlook, and data from Europe’s purchasing managers’ surveys released this week reinforced growth prospects. In addition, IHS Markit reported that the U.S.’s services index increased by 3% to 63.1%, and purchasing managers’ index for the U.S. manufacturing sector climbed by 1.5%, signaling a solid start to the second quarter; data from Australia and Japan are also consistent with that of Europe and the U.S. However, bottlenecked supply lines could push prices further up and endanger growth; similarly, surges in infections and new variants could dampen these encouraging signs of economic recovery.

6. On Friday, the European Commission said it expects to sign a new vaccine deal with Pfizer for 1.8 billion doses—the largest vaccine-supply deal so far—which would be delivered over 2021-2023. News of the agreement comes a day after media reported that the European Commission was working on a legal case against AstraZeneca after the pharmaceutical stopped delivering its vaccine to the bloc. The European Union is also questioning AstraZeneca’s use of $270 million it granted for the purchase of vaccine ingredients; according to the E.U., the company has not provided sufficient documents that confirm the acquisition. In India, the Serum Institute announced it would be able to expand its monthly production capacity to 100 million doses of AstraZeneca’s shot by July, not by May as executives initially thought. Currently, the Serum Institute churns out 60 to 70 million doses per month. In the U.S., a group of outside advising experts of the Center for Disease Control and Prevention (CDC) determined Friday that Johnson & Johnson’s COVID-19 vaccine could be distributed with a warning label affixed. Experts argued that the benefits of the vaccine outweigh the risks of rare blood clots. The announcement ends to the pause the U.S. put on the vaccine on April 13 because of reports of rare blood clots linked to the jab.

7. The Climate Summit concluded on Friday after two days of talks between 40 world leaders, including the world’s largest economies. On Thursday, China committed to reducing coal consumption, and the U.S. pledged to cut emissions 50%-52% from 2005. Similarly, several other countries vowed to cut future emissions and expand the use of renewable energies. On Friday, President Biden opened the session by saying that to “transition to a clean energy future, we must ensure that workers who have thrived in yesterday’s and today’s industries have as bright a tomorrow in the new industries.” Special Presidential Envoy for Climate John Kerry emphasized that this transition was not in spite of economic success but with it in mind: “No one is being asked for a sacrifice, this is an opportunity,” said Kerry. World leaders used the summit to announce ambitious green-energy programs. Denmark put out a first-in-its-kind plan to build energy islands that would use wind power to produce low-carbon electricity, and the United Arab Emirates said it plans to launch a research and development program to decrease agriculture-related emissions. Additionally, the U.S. announced a partnership with other oil-producing countries to quash oil-industry emissions. Despite the current administration’s goodwill and the favorable reception of its ideas abroad, Republican leaders have met President Biden’s agenda with disbelief. They claim that these policies will hurt the economy and the fossil-fuel industry.

8. Brent and West Texas Intermediate crude oils bookended the week with ascents but declined during the week. Although both benchmarks reached the week’s high on Tuesday, both oils fell during that session and the next day. Concerns over the current COVID-19 spike in India pushed down these benchmarks’ prices as fears over its effects on oil demand emerged. Despite the dip, Brent and WTI crudes managed to remain above the $65 and $60 marks, respectively. Brent and WTI oils’ demand bounced back on Thursday and Friday. On Thursday, positive news from the airline sector and the EU’s purchasing managers’ index helped reestablish confidence in oil demand’s growth. Brent crude settled for the week at $66.12 and WTI oil at $62.04.

9. This week, the euro and the Japanese yen traded to the upside against the U.S. dollar. The euro touched the week’s low in negative territory right after the opening of the trading week. However, by the wee hours of Monday, the currency had bounced back and engaged in a steep climb that put it well above the opening level. Next, the euro plateaued. By the early hours of Tuesday, it initiated the second ascent of the week; nevertheless, it could not maintain the pace and started a descent that accelerated as the morning progressed. The euro continued to lose ground on Wednesday morning but managed to recover ground throughout the day. Thursday began with a slow clamber followed by a steep fall of which the European currency recovered on Friday’s session. The week closed with a steep climb that took the euro to the week’s high and led it to close the week to the upside against the greenback. The Japanese yen touched the week’s low after a minute decline took it below the opening level at the start of the trading week. However, the currency quickly rebounded and engaged in a slow ascent at first that became almost vertical as Monday’s morning unfolded. Next, the yen plateaued and fell in the early hours of Tuesday through noon. In the afternoon, the Japanese currency reversed course and quickly climbed and then leveled again in the evening. On Wednesday, the yen attempted another climb but promptly corrected; however, it managed to ascend slowly for the remainder of the session until Thursday, when it picked up pace. Despite a brief attempt to accelerate the stride, the currency briefly fell and resumed its slow clamber, which concluded with a surge and the week’s high around Friday’s noon. Although a steep fall followed, the yen managed to end the week to the upside against the greenback.

Despite the good news Johnson & Johnson received on Friday, the Food and Drugs Administration (FDA) released a blistering report on the several severe failures it found at the Emergent BioSolutions plant in Baltimore. The said production plant spoiled 15 million doses of J&J’s shot in March after staff mixed up the ingredients for J&J and AstraZeneca’s vaccines. Inspectors recorded unsanitary conditions, inadequate training of workers, and improper handling of medical waste, among other things. Emergent is so far the only producer of raw vaccine for J&J but does not have the FDA’s certification to manufacture the inoculation. For this reason, the immunization doses that have been produced in this plant are under quarantine. On Wednesday, the FDA said in a news report that it would “not allow the release of any product until we feel confident that it meets our expectations for quality.” As a result of the cross-contamination, J&J backed off its commitment to deliver 24 million doses by the end of this month and stopped speculating about the shipment of the remaining doses of the 100 it had committed to dispatching by late May.

Alexei Navalny, Russian President Vladimir Putin’s primary opponent, announced the end of his weekslong hunger strike on Friday. Navalny’s exposition of corruption at the highest levels of the government and the decrease in Russian living standards have stained Putin’s and his party’s image. To offset the negative effects of Navalny’s campaign, Putin opted to fire up the patriotic fervor by threatening its Ukraine. In the course of several weeks, President Putin mobilized 100,000 troops to the Ukrainian border, prompting severe sanctions from the U.S., a call from NATO to de-escalate tensions, and the renewal of E.U.’s support for Ukraine. On Wednesday, Putin said in the state of the nation address that Moscow would respond harshly and swiftly to any foreign threat and argued other countries were treating Russia unfairly. “We really do not want to burn bridges, but if anyone mistakes our good intentions for indifference or weakness and plans to burn or even blow up those bridges, they should know that Russia will respond asymmetrically, swiftly, and harshly,” said the Russian head of state. However, Putin’s strategy failed. Protestors gathered on the streets of Moscow and other main cities to demand the release of Navalny as his health was taking a turn for the worse. On Thursday, the Russian Defense Minister announced the withdrawal of troops and, in an apparent attempt to de-escalate tensions with Kyiv and the West, he communicated on Friday that contingents would return to their permanent bases by May 1.

As businesses reopen and 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.

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