The Precious Metals Week in Review – September 3rd, 2021

1. Stocks continued to hit new highs this week despite the ongoing surge in Covid cases in the U.S. due to the spread of the delta variant. The exuberance was reined in on Friday when a less-than-stellar jobs report was released. Hurricane Ida blasted ashore in Louisiana over the previous weekend and the Category 4 storm continued to wreak havoc across most of the Eastern United States as it retained much of its power and plowed its way to the northeast.

2. For the week ending August 28, the seasonally adjusted number of Americans filing initial claims for unemployment decreased from the previous week’s revised level by 14,000 claims to reach a new level of 340,000. This is the lowest level for Initial claims since March 14, 2020. The previous week’s level was revised higher by 1,000 claims to a new level of 354,000. The 4-week moving average of claims was 355,000, a decrease of 11,750 from the previous week’s revised moving average. This is also the lowest level for the 4-week moving average since March 14,2020. The previous week’s average was revised higher by 250 to a new level of 366,750.

3. On Friday, the Nonfarm payroll report for August was released and the metrics missed economists’ expectations by a large margin. Nonfarm payroll growth in August increased by only 235,000 vs. economists’ expectations of 720,000 new jobs added. While payroll additions disappointed, the unemployment rate fell from 5.4% to 5.2%, which was in line with expectations. The labor force participation rate remained unchanged at 61.7%, stubbornly remaining below February 2020’s level of 63.3%. In remarks after the report was released, President Biden blamed the pandemic and unvaccinated Americans for the weak numbers, saying “There’s no question the delta variant is why today’s job report isn’t stronger. We need to make more progress in fighting the delta variant.” Biden went on to say “This is a continuing pandemic of the unvaccinated. Too many have not gotten vaccinated, and it’s creating a lot of unease in our economy and around our kitchen tables.”

4. Dr. Scott Gottlieb, former head of the FDA under President Trump, told CNBC this week that the Northeastern U.S. will likely experience another stronger wave of Covid infections due to the delta variant. Gottlieb said “I think our true delta wave is going to start to build after Labor Day here in the Northeast and the northern part of the country.” Gottlieb continued, saying “Now whether we see a wave of infection as dense and severe as the South, I don’t think that’s going to be the case because we have a lot more vaccination; we’ve had a lot of prior infection, which we also know is protective. But we will probably see a build in cases here in the Northeast. I don’t think that we’re done with this.”

5. General Motors announced on Thursday that it was adding, or extending, downtimes at eight of its plants in the U.S., Canada and Mexico in order to drastically cut North American vehicle production amid an ongoing shortage of crucial semiconductor chips. Many executives expected the chip shortage to be a short-term issue that would be resolved after the first half of the year, but analysts are now projecting that the shortage could continue well into 2022. The issue has triggered many automakers, including GM, to decline to release new forecasts for how much the parts shortage will impact earnings. The shortage has generated record prices for new automobiles due to the extremely low inventory, but the shortage is still expected to cost the global automotive industry at least $110 billion in revenue in 2021 alone.

6. Hurricane Ida ripped ashore in Louisiana as a powerful category 4 storm over the previous weekend, shutting down much of the oil production and refining businesses in the Gulf of Mexico region. Millions of people lost power as the high winds ripped transmission lines and even some transmission towers down. Many Louisiana residents remain without power and finding fuel for automobiles and generators has also become difficult. The storm held onto much of its strength as it began an inexorable move to the Northeastern U.S.. High winds and drenching downpours caused damage and flooding from the Gulf Coast all the way to New York as the storm made its way across the Eastern US. Widespread flooding and tornado damage occurred in New York and New Jersey days after the storm made its initial landfall and assessing the total extent of the cost of the damage wrought by the storm as it cut its path across the U.S. could take months.

7. Adding to the United States’ weather woes this week, California’s monstrous Caldor Fire continues to burn its way across the Sierra Nevada Mountain range, threatening the resort city of South Lake Tahoe, California. The Caldor Fire has burned over 200,000 acres, an area that is larger than the entire city of Memphis, and has forced many thousands of residents to evacuate.

8. On August 31, the United States officially brought its longest running war to a close as the last U.S. troops left Afghanistan after 20 years of occupation. The Biden administration’s handling of the U.S. withdrawal from Afghanistan has been met with widespread criticism and disdain across the world. Mary Beth Long, who served as Assistant Secretary of Defense for International Security Affairs under former President George W. Bush told CNBC’s Shepard Smith that the U.S.’ “credibility is rock-bottom, and it’s one thing to leave, but we did worse than that. We left American citizens, green card holders, and people that risked their lives for us behind. That’s nothing short of shameful.” Discussing the rapid takeover of Afghanistan by the resurgent Taliban and whether the U.S. would, or could, establish diplomatic ties with them, Long said “We’ve already known and been told by ISIS-K, by the Haqqani network, we have Al Qaeda operators coming through, over the border just a couple of hours ago. The idea that somehow the Taliban are magically going to run Afghanistan and we’re going to have some kind of political agreement with them is just pure fantasy.” President Biden’s job approval ratings have been steadily sinking as the debacle has played out, particularly after a suicide bomber attacked the airport in Kabul on August 26, resulting in the deaths of 13 American troops.

9. In the Eurozone, inflation pushed to a 10-year high ahead of a key meeting by the European Central Bank. Consumer prices jumped by a preliminary reading of 3% this month, from a year ago. If this figure holds, it will be the highest inflation reading across the Eurozone in the last 10 years. The ECB is due to meet on September 9 to discuss whether it will begin tapering off its asset purchase program and possibly relax some of its other stimulus measures and current inflation levels are sure to be a hot topic of discussion.

10. Oil prices for both Brent crude and U.S. West Texas Intermediate (WTI) held relatively steady for the week. Prices rose on Friday as analysts projected a rebound in global demand, and a slow recovery for the U.S. Gulf Coast refining hub from Hurricane Ida. The shutdowns are expected to deplete U.S. stockpiles as roughly 1.7 million barrels per day of oil production remains shuttered after the storm. OPEC+ stuck to their plan to add 400,000 barrels per day back to the market over the next few months despite continued economic uncertainty as the world continues to deal with the ongoing pandemic. Brent crude closed at 72.48per barrel while WTI settled at 69.10 per barrel.

11. The euro began the week with a brief bump to the upside against the U.S. dollar but had drifted into negative territory by late Monday afternoon. The euro had climbed back into positive territory by Tuesday, but a sharp drop late in the day on Tuesday sent it back near opening levels for the week. The euro moved essentially sideways throughout Tuesday evening but began an upward climb as on Wednesday that saw the currency touching its highs for the week by Friday. A brief dip just before the close on Friday was quickly reversed and the euro will close out the week to the upside against the U.S. dollar. The Japanese yen drifted sideways-to-lower as it opened the week against the U.S. dollar, drifting lower into negative territory by late Wednesday, when a sudden spike shot it back into the positive. The climb was short-lived, and the yen had dipped to its lows for the week by mid-day on Wednesday as September began. The yen shot near vertically back towards its opening levels after touching its lows, but did not regain positive territory until late Friday, just before closing. The yen will also close out the week to the upside against the U.S. dollar.

The United States’ bungled withdrawal from Afghanistan left a power vacuum in the country that was swiftly filled by the resurgent Taliban, the very enemy the U.S. has fought against in Afghanistan for 20 years. The political situation in the region remains in turmoil following the U.S.’ exit, with the Taliban once again declaring themselves as the legitimate government of Afghanistan after overrunning the country before the U.S. could even recall all of its soldiers and evacuate its citizens and allies in the region. The power shift in the Middle East could have far-reaching implications into the foreseeable future as the Taliban seeks to legitimize and expand its control in the region. Suicide bomber attacks on the airport in Kabul, which resulted in the deaths of 13 American troops and countless injuries to others, has raised the fear that Afghanistan could once again become a prime location as a headquarters for terrorist groups, allowing them to plot their attacks without interference or any sort of monitoring by those nations which could be the intended target of those plots.

The ongoing global pandemic continues to impact global economies as new variants emerge. Some experts fear that emerging variants may contain mutations that might allow them to be able to evade the protections supplied by the current crop of vaccines. The delta variant continues to be the dominant strain across the globe, causing spikes in new hospitalizations and deaths across the world. Many countries appear to be contemplating implementing new rounds of restrictions and shutdowns in renewed efforts to control the spread. Many corporations have paused, or even reversed, their plans to bring their employees back into the office, unsure of their ability to guarantee the safety of the workplace amid the spread of the more contagious variants of Covid. The impacts of further shutdowns could spell the death knell for small businesses such as bars and restaurants that are unable to operate effectively without a steady in-person clientele presence.

As Europe and the U.S. both watch their inflation levels climb, their respective central banks have begun to openly discuss the possibility of tapering off the stimulus programs they have implemented throughout the course of the financial crisis brought on by the global pandemic. Savvy investors, watching these same inflation levels climb, continue to acquire physical precious metals, keeping in mind the long-term nature of their ownership, for the purpose of building a well-diversified portfolio. 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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