The Precious Metals Week in Review – September 10th, 2021

1. It was a rough week for stocks as they declined for five straight days under continued economic uncertainty. Inflation indicators continue to be troubling to many analysts despite seemingly constant reassurances from the Federal Reserve that current price escalations are merely “transitory”. It would seem that there is growing dissent among Fed members as to whether inflation will stick around longer, and be much worse, than the central bank is currently projecting.

2. For the week ending September 4, the seasonally adjusted number of Americans filing initial claims for unemployment decreased from the previous week’s revised level by 35,000 claims to reach a new level of 340,000. This is once again the lowest level for Initial claims since March 14, 2020. The previous week’s level was revised higher by 5,000 claims to a new level of 345,000. The 4-week moving average of claims was 339,500, a decrease of 16,750 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 1,250 to a new level of 356,250.

3. The delta variant of the Covid-19 virus continues to be of primary concern in the ongoing fight against the continuing global pandemic. Despite widespread blame being placed on the unvaccinated for furthering the spread of the disease, many of the cases involving the delta variant have been occurring in those who had already been previously vaccinated. In a speech on Thursday regarding his administration’s plan to battle the ongoing pandemic, President Biden announced a set of sweeping changes which are already being viewed by many as massive government overreach with the potential to increase the nation’s debt load exponentially. Under Biden’s new mandates, many of which were issued via Executive Order, all federal employees must receive a Covid vaccine. Any health care facilities that receive Medicare and Medicaid funding must also ensure that their staff is fully vaccinated. Biden also asked the Department of Labor to issue a new rule requiring employers with more than 100 employees to mandate vaccines or require weekly Covid testing.

4. The Fed received further blows to its “transitory” outlook on inflation this week as Kroger noted that its profit margins were being squeezed by higher costs and that it has debated increasing costs of its groceries to offset the narrowing margins. The home improvement sector also reported higher costs, with Randy Moser, owner of Buss Paints in Pennsylvania telling CNBC “We’ve had multiple price increases across the board from every manufacturer we deal with. It’s been this way for a while now, and it seems like it’s not going to get any better over the next three to six months, either.” Nestle’s CEO weighed in this week as well, noting that he expected “significant inflation” in 2021 and 2022 due to continue shocks to the supply chain. In other inflation news, Producer inflation jumped another 0.7% in August, from the month before, making the year-on-year increase a whopping 8.3% over one year ago. This is the largest yearly price increase on records going back to 2010.

5. Efforts by the U.S. to continue evacuating American citizens and allies out of Afghanistan were hampered this week by both the new Taliban government and an emerging health crisis. The Taliban has been delaying charter flights at the airport in Kabul from leaving, reportedly boarding the flights and removing any persons that they deem should be detained in Afghanistan for questioning. The U.S. also had to temporarily halt inbound flights carrying evacuees from Afghanistan after four cases of measles were diagnosed among passengers.

6. Saudi Arabia stepped into the ongoing meltdown that the U.S.’ bungled departure from Afghanistan has wrought in the Middle East. Responding to a question regarding what the Middle East needs from the U.S., now that the Taliban has retaken control in Afghanistan, Prince Turki Al-Faisal said “I think we need to be reassured about American commitment. That looks like, for example, not withdrawing Patriot missiles from Saudi Arabia at a time when Saudi Arabia is the victim of missile attacks and drone attacks – not just from Yemen, but from Iran.” In June, multiple media outlets reported that the Pentagon was contemplating reducing its air defense assets in the Middle East, including Patriot missile batteries that have been stationed in the region. The power vacuum in Afghanistan left by the U.S.’ departure was quickly filled by the Taliban and they have already begun a brutal purge of former members of the previous government and many others that they deemed to have assisted the Americans during their time there.

7. Signs of crude oil supply shortages in the U.S. continued this week, driven by the swath of destruction that hurricane Ida ripped across the Gulf Coast region, crippling much of the major drilling and refining capacity in the U.S. Roughly 75% of the U.S. Gulf’s offshore oil production remains halted as the region tries to assess damage and begin restoring services in those areas which were hit the hardest. The supply shortage acted to place upward pressure on oil prices and Brent Crude closed the week out at $72.92 per barrel while West Texas Intermediate settled at $69.72 per barrel.

8. The euro began the week attempting to drift higher against the U.S. dollar, but quickly began a downward trend that had it touching its lows late on Wednesday. After touching its lows for the week, the euro moved essentially sideways, trading in a narrow range for much of the rest of the week. The euro attempted a brief recovery on Friday late in the morning but had returned near its lows by the time markets closed Friday afternoon. The Japanese yen drifted lower against the U.S. dollar for at the start of the week but managed to hold near opening levels until early Tuesday morning when the yen began a steady move to the downside. The yen touched its lows against the dollar by Wednesday and then began a steady climb higher that took it into positive territory by late Thursday. The yen could not maintain its grip on positive territory and drifted slightly lower on Friday to close out the week to the downside against the U.S. dollar.

Inflation pressures continue to mount across the globe, primarily driven by ongoing supply chain issues and a seemingly global labor shortage issue. Central banks in the U.S. and Europe are all slated to hold monetary policy meetings in the coming weeks and inflation will likely be the primary topic of each of their discussions. The European Central Bank is widely expected to soon begin tapering off its stimulus measures to address inflation levels across the euro Zone which may soon surpass 10 percent. Inflation levels in the U.S. also continue surging, on a year-over-year basis, and some Federal Reserve members have openly begun to say that inflation levels may persist longer than their “transitory” term might imply.

President Biden announced sweeping new measures aimed at combatting the surge of Covid cases that have swept across the country as the much more highly transmissible delta variant continues to spread. The broad plan would force federal employees to get vaccinated, removing the option to use weekly testing as an alternative. All federal contractors will be required to prove all of their employees are vaccinated, or face losing their ability to bid on any further federal work. In total, over 100 million workers in the U.S. will fall under one of the new mandates. Many of the new measures were passed via Executive Order and it appears a growing number of the population feels that the policies laid out in the new plans are one of the most blatant examples of governmental overreach in decades.

As inflation levels have continued to surge higher across the world, many experts now expect central banks to begin taking steps to taper off the stimulus programs that were put into place during the latest financial crisis that was brought on by the ongoing 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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