1. It was another volatile week as inflation indicators, surging energy prices across the globe, and continued gridlock in Washington, D.C. all had their impact on markets. The week was capped off with a less than stellar jobs report in the U.S. on Friday that added even more downward pressure on markets.
2. For the week ending October 2, the seasonally adjusted number of Americans filing initial claims for unemployment decreased from the previous week’s revised level by 38,000 claims to reach a new level of 326,000. The previous week’s level was revised higher by 2,000 claims. The 4-week moving average of claims was 344,000, an increase of 3,500 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 500 claims.
3. September’s Non-Farm Payrolls report showed the U.S. added just 194,000 new payrolls, with the labor force shrinking by 183,000. This is the first Non-Farm Payrolls report to come out since the federal unemployment programs that were implemented to help offset the economic damage caused by the ongoing pandemic ended on Labor Day. The new payrolls number fell massively short of economists’ expectations and showed a marked slowdown from previous months. Many experts believed that the extended unemployment benefits may have been contributing to the shrinking labor force, but the fact that the labor force continued to shrink after the benefits expired has these same experts questioning their findings. Focus has shifted back to blaming the pandemic itself, particularly the ongoing wave of delta variant infections across the globe, for the shrinking labor pool.
4. The U.S. Senate managed to pass a bill on Thursday that will allow the U.S. to avoid a default on its debt within the next few weeks – at least for now. 11 Republicans joined all 50 democrats to provide the minimum 60 votes needed to end debate and move the bill forward which will allow the debt limit, or so-called “debt ceiling”, to increase by $480 billion. The U.S. Department of Treasury estimates this will allow it to pay the U.S. government’s bills until at least December 3. The bill would also allow the national debt, which currently stands at a staggering $28.4 trillion to grow to roughly $28.8 trillion. Putting the bill together was a contentious process between Democrats and Republicans. Senate Majority Leader Chuck Schumer likely made any future cooperation from the Republicans on drafting the full appropriations bill that must be in place before the temporary measure expires in December difficult, if not impossible. Schumer, a Democrat, launched into a public rant after securing his required votes which berated Republicans for their views on the debt ceiling. His rant left even the members of his own party shocked at his words. The bill will now move to the House of Representatives, where Speaker Nancy Pelosi and the Democrat controlled House are widely expected to approve the Senate’s version of the bill, which would allow them to put it on President Joe Biden’s desk for signature before an October 18 deadline.
5. Natural gas prices, and power prices in general, continue to surge in the U.K., Europe and Asia where they have reached record high levels. In the U.S., prices have already doubled for the year, but industry experts believe that the U.S. is likely to be insulated from the price levels seen across the rest of the world. Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch said “We are at a unique point in time now where just all energy prices are going up. The U.S. is much more insulated from this global energy trend than the rest of the world.” Analysts at Deutsche Bank noted that prices in Europe are up by a factor of five, while in Asia and the U.S., prices are only about one and a half times higher. The firm said, in a note to its clients, that“The importance of these moves on inflation, growth and external accounts are not to be underestimated. These price moves are a big deal.”
6. The Organization for Economic Cooperation and Development, a multi-national group comprised of the most developed nations, announced that they had made a “major breakthrough” on corporate tax rates after years of contentious disagreement. The group agreed to a global minimum corporate tax rate of 15%, which could have major implications for smaller economies, such as the Republic of Ireland, to lure in large international firms with a previously lower tax rate. In a statement released on Friday, the OECD said, “The landmark deal, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.”
7. In yet another sign inflation may be moving in for the long term, cotton prices hit a 10-year high on Friday, reaching $1.16 per pound – a level not seen since July of 2011. Levi CEO Chip Bergh, discussing the price surge, said “In 2011, we needed a prayer meeting.” This time around, retailers such as Levi have managed to pass along price increases to customers and have so far avoided taking massive hits to their margins.
8. Oil prices continued to climb this week with West Texas Intermediate Crude climbing past $80 for the first time since November 2014. WTI dipped back below the $80 mark by the time the market closed on Friday but still nearly closed the traditional gap that has existed between it and Brent crude, which saw much more muted moves higher this week. Brent topped $82 per barrel on Friday and managed to maintain that level as the markets closed.
9. The euro drifted higher to start the week, but quickly reached its highs against the U.S. dollar Sunday overnight and had already begun moving rapidly lower by the time U.S. markets opened on Monday. By Tuesday morning the euro had touched its lows for the week and was attempting to stage a recovery. The euro drifted sideways in a narrow trading range until just before the market closed on Friday, when it bounced higher again. Despite the ground recovered, the euro will still close out the week to the downside against the U.S. dollar.
10. The Japanese yen spent the first part of the week steadily moving lower against the U.S. dollar. The yen bounced back to the upside in early trading on Tuesday, but once again began drifting lower later in the day. The yen continued its downward trend as the week continued, with one sharp move to the upside on Friday which was brief and had reversed by the time markets closed. The yen will finish the week lower against the U.S. dollar.
India is apparently about to join China as the next Asian country to face a power crisis. More than half of its 135 coal-fired power plants are struggling to find supplies of coal. Roughly 70 percent of the country’s power is generated by coal and the country is having difficulty importing enough coal to augment its native supplies. Global coal prices have increased by 40% and India’s imports have fallen to two-year lows amid the spike. Dr. Aurodeep Nandi, India Economist and Vice President at Nomura said “We have seen shortages in the past, but what’s unprecedented this time is coal is really expensive now. If I am [as a company] importing expensive coal, I will raise my prices, right? Businesses at the end of the day pass on these costs to consumers, so there’s inflationary impact – both direct and indirect – that could potentially come from this.” India’s Power Minister RK Singh, in an interview with The Indian Express newspaper, said that the situation is “touch and go” and suggested that India “brace itself” over the next five to six months. Power rationing in India would trigger the same issues there that China is now facing as it suffers through its own power crisis – reduced productivity. If factories and plants in India are forced to shut their doors during mandated power outages as is now happening in China, supply chain disruptions can be expected to expand dramatically.
It appears that the U.S. will narrowly avoid defaulting on its debt in the coming weeks. Democrats in the U.S. Senate finally convinced enough Republicans to put aside their concerns over raising the so-called debt ceiling and vote for legislation to temporarily raise it until December 3 to give the Senate additional time to draft a full appropriations bill that will address funding the government beyond 2021. The bill that passed the Senate will now go to the House of Representatives, where it is widely expected to be approved and be sent to President Biden’s desk for signature before the October 18 deadline, when government funding would run out. The bill that passed the Senate will allow the U.S. government to push its national debt to additional record levels, approaching $28.8 trillion dollars.
Ongoing supply chain disruptions, surging in energy prices, and rising commodity prices across the globe continue to increase pricing pressures for consumer goods. Price increases are now being directly passed on to consumers and appear to be sticking, which is leading many experts to revise their opinions on whether the U.S. Federal Reserve is correct on the “transitory” nature of inflation this time. India’s burgeoning power crisis could lead to similar issues that China is facing, namely seeing its manufacturers forced to cut production levels to conserve power, which could further impact global supply chains.
Savvy investors, continue to seek to diversify their portfolios to prevent overexposure to equity markets, or any one specific sector. These same investors continue to watch for buying opportunities that will allow them to acquire additional physical precious metals to aid in diversifying their investment portfolios at a discount. Remember, the key to profitability through the ownership of physical precious metals is to acquire the physical product and hold 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.
Friday to Friday Close (New York Closing Prices)
|Oct. 1, 2021||Oct. 8, 2021||Net Change|
Previous year Comparisons
|Oct. 9, 2020||Oct. 8, 2021||Net Change|
Here are your Short Term Support and Resistance Levels for the upcoming week.