The Precious Metals Week in Review – May 21st, 2021

1. Markets remained volatile this week as China took steps to rein in cryptocurrencies and the US Treasury also took steps to increase regulations and tax reporting requirements for cryptos. Stocks and cryptos both saw increasing pressure to the downside this week as regulatory and inflationary concerns continued to rise and surges in Covid cases continued around the globe.

2. For the week ending on May 15, the seasonally adjusted number of Americans filing for unemployment decreased by 34,000 claims from the previous week’s revised level to 444,000. This marks the lowest level for initial claims since March 14, 2020. This was just prior to the US embarking on a near nationwide lockdown to battle the Covid-19 pandemic when the figure was at 256,000. The previous week’s initial claims level was revised higher by 5,000 to a new level of 478,000. The 4-week moving average of claims stood at 504,750, a decrease of 30,500 from the previous week’s revised average. This figure also stands at its lowest level since March 14, 2020, when it stood at 225,500. The previous week’s moving average figure was revised higher by 1,250 to a new level of 535,250.

3. In the U.S., existing home sales dropped for the third straight month, falling 2.7% in April from March’s figures. While sales were over 30% higher than a year ago, the figure is misleading due to the nationwide shutdown in 2020 which affected every sector of the U.S. economy. Compared instead to April 2019, sales were up only 11% over that year. The supply of homes for sale at the end of April was down 20%, and over half of the sales that did go through to closing were closed at a figure that was higher than the initial asking price. Single-family housing starts also dropped in April, falling by over 13% compared to March numbers. Prices for both new and existing homes remain at record levels as labor and material shortages drive up costs. Many builders have resorted to adding “escalation clauses” to the sale prices of their homes due to rising material costs. Such clauses specify that if building material prices increase by a certain percentage, the customer is responsible for paying the difference.

4. For the first time in nearly 12 months, the U.S. is recording fewer than 30,000 new Covid cases per day. According to federal data, 48% of the U.S. population has begun or has already completed vaccinations. The seven-day average of new infections, according to data compiled by Johns Hopkins University, fell to 29,100 as of Thursday. This marks the first time the moving average of new infections has fallen below 30,000 since June 22, 2020.

5. After a plant run by Emergent BioSolutions, which was manufacturing ingredients for the Johnson & Johnson version of the Covid-19 vaccine, was shut down last month, apparently, the Food and Drug Administration seized doses of the shot for further testing to see if any of them could be released for use – despite the issues which occurred at the factory that manufactured the ingredients. At a congressional hearing before the House Select Subcommittee on the Coronavirus Crisis, Emergent’s CEO Robert Kramer was asked how many doses of the J&J vaccine were being held by the FDA that likely were not contaminated. Kramer responded, “It has been reported in a number of news agencies that there are probably over 100 million doses of the J&J vaccine that we’ve manufactured that are now being evaluated by the FDA for potential release and availability.” J&J declined to comment on the number of doses that were potentially being evaluated for release by the FDA.

6. China intensified its calls for a crackdown on the mining and trading of Bitcoin and other cryptocurrencies. Bitcoin has plunged in recent weeks as more and more countries are discussing increasing regulations or implementing outright bans of the use of cryptocurrencies in their financial markets due to their high potential for enabling illegal or illicit activities. In a statement from Chinese Vice Premier Liu He and the State Council, Chinese authorities announced that tighter regulation is needed to “protect the financial system.” The statement was released late on Friday, local China time, and said that it is necessary for the State to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.”

7. The U.S. also began taking steps to rein in Bitcoin and other cryptocurrencies this week, with the Treasury Department announcing that it will require any transfer worth $10,000 or more to be reported to the IRS. The Treasury announced the move was due to the fact that “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly, including tax evasion.” Over the last month, investors have watched the value of Bitcoin plummet by 25% as multiple governments across the globe have taken steps to increase regulations surrounding cryptos. Wall Street analysts have been increasingly sounding the alarm about cryptos, noting that both the Treasury and the Securities and Exchange Commission could soon take a more active role in attempting to regulate the sector in the United States.

8. In the Middle East, Egypt brokered a cease-fire deal between Israel and Hamas which both sides apparently agreed to without any preconditions. The conflict in the Middle East has been raging now for nearly two weeks as world leaders have scrambled to try to convince both sides to de-escalate the situation before it leads to an all-out war. The agreement appeared to be held on Friday morning across the region but many Israelis and Palestinians fear that the peace is fragile, at best.

9. After three days of losses, oil prices for both Brent and West Texas Intermediate (WTI) crude oil surged on Friday. The late rally was not enough to take either of them positive for the week as investors explored the likelihood that Iranian crude supplies might be close to coming back online after officials said progress had been made on a nuclear deal. Both contracts were on track to take a 3% loss on the week, their largest loss since March, with Brent settling at $66.44 per barrel and WTI settling at $63.58 per barrel. Downward pressure on oil prices could continue if nuclear talks between Iran, the U.S., and the European Union continue to show signs of progress.

10. The euro began the week sliding lower against the U.S. dollar, but by late Monday morning had begun to reverse course and climb out of negative territory. The euro shot sharply higher against the dollar on Tuesday and had touched its highs for the week by Wednesday morning. The euro began a retreat after touching its highs but the plunge was halted late Wednesday night and the embattled currency reversed course again and began heading higher through most of Thursday’s trading session. The euro could not reclaim its highs and late Friday morning began another sharp decline but still remained in positive territory and the euro will close out the week to the upside against the US dollar. The Japanese yen began the week in similar fashion to the euro, sliding slightly lower as trading began, but swiftly regaining positive territory by Tuesday morning. The yen paused and moved sideways in a narrow range against the US dollar on Tuesday before dipping back near its opening levels late Wednesday afternoon. The yen shot sharply higher late Wednesday, touching its highs for the week, but the surge was short-lived and the yen soon had plunged back near opening levels again. The yen spent the rest of the week steadily moving higher, nearing its highs for the week once more in late Friday trading before declining slightly just before the close. The yen remained in positive territory and will also close out the week to the upside against the U.S. dollar.

Cryptocurrencies have begun to tumble as world governments look to increase regulation and oversight over shadowy payments. Even as they seek to increase regulations over cryptocurrencies such as Bitcoin, Dogecoin, and others, China and the U.S. both appear set to introduce their own branded digital currencies backed by nothing more by their respective paper fiat currencies. The move for central banks to each create their own cryptocurrencies could be what is behind the drive to increase regulations on competing products and thus make them more difficult to use within the global financial system.

The ongoing battle against the Covid-19 pandemic continues, with India fast becoming the latest hotspot for new infections. The rate of infection in that country has become so fast that its government moved to ban exports of the AstraZeneca version of the vaccine so that it could increase its own stockpiles. The ban angered Africa’s top health officials as the AstraZeneca vaccine was key to Africa’s own vaccine campaigns. Africa and other low and middle-income nations depend on the United Nations’ backed COVAX initiative to receive vaccine distributions and India was a key supplier of the AstraZeneca dose for that program.

As India struggles to deal with its latest upsurge in Covid cases, U.K. Prime Minister Boris Johnson fears that the variant of the virus that has triggered India to ban exports of the vaccines that it manufactures there may make its way to the U.K. Johnson, speaking at a news conference on Friday, said that the Indian variant appeared to be more transmissible than other strains, but also cautioned that it was not clear how much more contagious it may be. The U.K. plans to accelerate the administration of the second dose of vaccines to the over 50 and clinically vulnerable populations that have already received their first shots. Johnson attempted to reassure the public, saying that there was no evidence that the vaccines would be ineffective against the new variant, but followed up with “I have to level with you, this new variant could pose a serious disruption to our progress, and I must stress that we will do whatever it takes to keep the public safe.”

The U.S. Treasury Department release plans on Thursday for a 15% global minimum corporate tax rate, and Germany appears to agree with them. The Treasury said that international negotiations should be ambitious, a sign that the final figure could be higher than the proposed 15%. Current corporate taxes in the U.S. stand at 21% but the Biden administration has plans to raise it back to 28% – and it wants the rest of the world to pay higher rates as well.

As the world continues to push towards reopening its various economies, despite the ongoing surge in Covid cases in some areas, price volatility is likely to continue among all sectors. Energy prices are likely to be extremely volatile, particularly in the U.S., given the Biden administration’s apparent disdain for America being able to utilize its own coal, gas, and oil resources to supply its energy needs. Stocks are also likely to continue to be volatile as retail and manufacturing sectors try to regain control over their inventories amid reopening efforts. The tech sector and technology-based products are also likely to remain volatile, given key shortages in semiconductor chips that have yet to be resolved. As volatility in other areas continues to escalate and prices continue to climb in other products and commodities, many investors are looking at physical precious metals with renewed interest and have continued to acquire the product, whenever buying opportunities have presented them with the opportunity to do so, for the purpose of trying to maintain a well-diversified investment portfolio.

Remember, precious metals should be viewed as a long-term investment. Historically, the key to profitability through the ownership of physical precious metals has been 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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